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Form a Business

Commercial Rent Tax

RCNY tit. 19, ch. 7
in effect

19 RCNY § 7-01 Definitions.

§ 7-01 Definitions. Allocation of single rent for two or more taxable premises. Where, under the terms of a lease, the lessee pays a single rent to the lessor for two or more taxable premises, the rent applicable to each such premises shall be ascertained in accordance with the allocation formula prescribed herein. The allocation formula is based on three factors as follows: (1) Property factor. (i) The lessee is required to set forth: (A) the average value of the tangible personal property employed or used by him in each taxable premises occupied or used by him during the tax period, and (B) the average value of all tangible personnel property employed or used by him in all of the taxable premises occupied or used by him during the tax period. (ii) The words "tangible personal property" as used herein, mean and include all corporeal personal property, such as furniture, furnishings, machinery, tools, implements, goods, wares and merchandise, and do not mean or include money, deposits in banks, shares of stock, bonds, notes, credits, or evidences of an interest in property and evidences of debt. The values as at the beginning and the end of each tax period may be averaged to obtain the value of the tangible personal property employed or used in the taxable premises. (iii) A percentage for each taxable premises is then to be computed on the basis of a fraction, using the average value of the property of each taxable premises under (A) as the numerator, and the average value of all tangible personal property in all of the taxable premises under (B) as the denominator. (2) Wages and salaries factor. (i) The lessee is required to set forth the total amount of wages, salaries and other personal services compensation paid during the tax period (A) to officers and employees who work in, or from, or are attached to, each taxable premises, and (B) to all officers and employees engaged or employed in all of the taxable premises. (ii) A percentage for each taxable premises is then to be computed on the basis of a fraction using the total amount set forth in (A) as the numerator and the total amount under (B) as the denominator. (iii) The wages and salaries factor shall include all forms of compensation paid to officers and regular employees. Amounts paid to persons whose relationship is that of an independent contractor are not to be included. (3) Receipts factor. The lessee is required to ascertain the receipts from sales and services during each taxable period applicable to each taxable premises. A percentage is then to be computed for each taxable premises on the basis of a fraction, using as the numerator the total receipts from each such taxable premises and, as the denominator, the total receipts from all such taxable premises. The percentages which are determined for the three factors for each taxable premises are to be added and the total thereof is to be divided by three to obtain the average percentage for each taxable premises. If the numerator and denominator of any fraction are both zero, the factor is deemed to be non-existent and shall be omitted in calculating the average of the percentage. In such event, the total of the remaining percentages is to be divided by the existing factors. If, however, the numerator alone is zero and the denominator is represented by an amount, there is a resultant factor, viz., zero, which is to be included in the calculation of the average of the percentages. The average percentages thus obtained for each taxable premises is to be applied to the total single rent paid for all taxable premises to obtain the amount of the rent applicable to each taxable premises as illustrated below. The allocation formula shall be employed, even though included in the total number of premises for which a single rent is paid there may be included one or more premises which are not taxable premises. In such case, the premises which are not taxable premises shall, for the purposes of the allocation formula, be included in each factor. Whenever the Commissioner of Finance shall determine, either upon his own initiative or upon application by the taxpayer, that the prescribed allocation formula works unfairly or inequitably to a particular taxpayer or class of taxpayers, he may provide for a different or other method of allocation which is calculated to effect a fair and proper apportionment of rent applicable to each taxable premises. When preparing a final return for a tax year for each taxable premises, the factors described above shall cover the full tax year. Example 1: Taxable and/or Non-Taxable Premises Item No. Factors A B C Total 1) Tangible personal property $10,000 $15,000 $25,000 $50,000 2) Salaries and wages $30,000 $36,000 $54,000 $120,000 3) Receipts from sales and services $105,000 $150,000 $245,000 $500,000 4) Rent paid $50,000 Percent to Total* A B C Total 5) Tangible personal property 20% 30% 50% 100% 6) Salaries and wages 25% 30% 45% 100% 7) Receipts 21% 30% 49% 100% 8) Total percentage (Items 5 to 7) 66% 90% 144% 9) Average percentage (Item 8÷ 3) 22% 30% 48% 10) Rent applicable to each premises (Item 9 × Item 4) Where premises are taxable, include applicable amount in base rent $11,000 $15,000 $24,000 $50,000 * To obtain percentage of each factor for each premises, divide the amount of the factor for each premises by the total amount of the same factor for all premises. Base rent. The rent paid for each taxable premises by a tenant to his landlord for a period, less the amounts received by or due such tenant for the same period from any subtenant of any part of such premises, as provided in the law. These allowable deductions are: (1) Amounts received or due as rent for premises which constitute taxable premises of such subtenant. Example 2: A tenant rents a store for business purposes for a rent of $34,000 per year. He sublets part of the store to a concessionaire for business purposes for a rent of $18,000 per year. The tenant's base rent is $16,000. (i) No deduction is permitted where the subtenant is exempt from tax because he uses the premises for no more than fourteen days in a tax year, whether or not consecutive, where his agreement with the landlord does not require him to pay rent for a longer period (see 19 RCNY § 7-04(f)(1)). Example 3: A tenant rents a store for business purposes for an annual rent of $12,000. During the year he permits the use of a portion of the store for a period of one day each month by a concessionaire who pays rent of $500 for each day's occupancy. The tenant's base rent is $12,000. Since the concessionaire is exempt from tax because he uses the premises for less than 14 days in a tax year, rent paid by the concessionaire is not deductible from the rent paid by the tenant. (ii) No deduction is permitted where the subtenant is exempt from tax because his base rent for the tax year is under the amount prescribed in 19 RCNY § 7-04(f)(2). To illustrate: The tenant of a store pays rent of $20,000 per year. He sublets part of the store to a subtenant for business purposes for a rent of $4,500 per year. The tenant's base rent is $20,000. Since the subtenant is exempt from tax because his base rent is not more than $4,999 per year (after December 1, 1984, not more than $10,999 per year), the subtenant's rent payments are not deductible from the rent paid by the prime tenant. (2) (i) However for the periods beginning on and after June 1, 1985, rent received or due from a tenant exempt from tax pursuant to 19 RCNY § 7-04(f)(2) may be deducted if such subtenant occupies or uses the premises pursuant to a written agreement made prior to June 1, 1984 (or June 1, 1985 where the subtenant is exempt because of the reduction in base rent provided for in 19 RCNY § 7-01 "base rent" (6)(ii), the terms and conditions of which have not been changed or amended. Example 4: The tenant of a store pays rent of $25,000 per year. He sublets part of the store to a subtenant for a rent of $10,000 per year pursuant to a written agreement executed May 1, 1984, the terms and conditions of which have not been changed or amended. The tenant's base rent is $15,000. Although the subtenant is exempt from tax because his base rent is not more than $10,999 per year, the subtenant's rent payments are deductible from the rent paid by the prime tenant because they are made pursuant to a written agreement made prior to June 1, 1984, the terms and conditions of which have not been changed or amended. The tenant of a store in Queens County pays rent of $25,000 per year. He sublets part of the store to a subtenant for a rent of $12,000 per year pursuant to a written agreement executed May 1, 1985, the terms and conditions of which have not been changed or amended. For the tax year June 1, 1985 through May 31, 1986, the tenant's base rent is $13,000. The deduction is permitted because from June 1, 1985 through December 31, 1985, the subtenant is subject to tax and from January 1, 1986 through May 31, 1986, the tenant, though exempt from tax because the 10% reduction allowable under 19 RCNY § 7-01 "base rent" (6) brings his base rent under $11,000 for that period, occupies or uses the taxable premises under a lease executed before June 1, 1985, the terms and conditions of which have not been changed. This exception allowing the deduction of rent paid by or due from an exempt subtenant does not apply if the terms and conditions of the written lease agreement are changed or amended in any material respect, including (but not limited to) any change or amendment to the amounts payable by the subtenant to or on behalf of his landlord or any other material change affecting the financial obligation of the subtenant; terms relating to the tenants use of the premises or his obligations relating to improvement, repair or maintenance of the premises; the amount of space leased or the term of lease. Not included are changes in the financial obligation of the subtenant fixed and determined by the terms of the lease at the time of its execution. Example 5: A tenant of a store pays rent of $25,000 per year. On June 1, 1983, he sublets part of the store to a subtenant for business purposes. The lease is to run for five years and the annual rent is $4,000 for the first year, $5,000 for the second, and $7,000 for the third, fourth and fifth years. For tax periods June 1, 1983 through May 31, 1984, and June 1, 1984 through May 31, 1985, the tenant's base rent is $25,000 (no deduction is permitted); for the tax periods June 1, 1985 through May 31, 1986 and June 1, 1986 through May 31, 1987, the tenant's base rent is $18,000 ($25,000 – $7,000). On June 1, 1987, the lease is amended to increase the last year's rental to $10,000 and to extend the term of the lease for an additional year for a $10,000 rental payment. The tenant's base rent for the tax periods June 1, 1987 through May 31, 1988 and June 1, 1988 through May 31, 1989 is $25,000 (no deduction is permitted). (3) Amounts received or due as rent for premises which do not constitute taxable premises and which are used by a tenant as lodging or residential premises (including such residential premises in hotels, apartment hotels or lodging houses as defined in the Tax on Occupancy of Hotel Rooms Law imposed by Chapter 25 of Title 11 of the Administrative Code of the City of New York, or effective August 1, 1965, in the Sales Tax Law imposed by Subchapter 1 of Chapter 20 of Title 11 of the Administrative Code of the City of New York). Example 6: The owner of a hotel leases the hotel to an operating company, which pays the owner an agreed rent. The operating company rents rooms in the hotel to residential guests. The operating company's base rent consists of the rent paid by it to the owner, less the amounts received or due to it from the guests. (4) Amounts received or due from a subtenant who is exempt from tax under subdivisions (a) through (f) of 19 RCNY § 7-04. Example 7: A lessee of an office building rents office space in the building to commercial tenants and to a charitable organization which uses the office for non-profit purposes. The lessee, in order to arrive at the amount of his base rent, may deduct from the rent paid by him the rent received by him from the charitable organization, as well as the rent received by him from the commercial tenants. (5) Amounts received or due as rent for premises which do not constitute taxable premises where such rent is, or to the extent that such rent is deductible from the base rent of such tenant by reason of the fact that such premises are taxed pursuant to the Tax on Occupancy of Hotel Rooms imposed by Chapter 25 of Title 11 of the Administrative Code of the City of New York City or, effective August 1, 1965, pursuant to the Sales Tax Law imposed by Subchapter 1 of Chapter 20 of Title 11 of the Administrative Code of the City of New York, to the extent that such premises are subject to, and during the period they are subject to, such tax. To illustrate: The owner of a hotel leases the hotel to an operating company, which pays an agreed rent to the owner. The operator rents a meeting room to a civic association, which pays the operator the tax on occupancy of hotel rooms imposed by Chapter 25 of Title 11 of the Administrative Code of the City of New York, or, effective August 1, 1965, the Sales Tax imposed by Subchapter 1 of Chapter 20 of Title 11 of the Administrative Code of the City of New York. The operator, in order to arrive at the amount of his base rent, may deduct the amount of rent paid to it by the civic association. (6) Amounts received as rent for premises which do not constitute taxable premises, pursuant to a common-law relationship of landlord and tenant (notwithstanding the definition given to those terms in 19 RCNY § 7-01 "Landlord" and "Tenant"), except where it is received as rent, whether or not such landlord-tenant relationship exists, for premises which are occupied as or constitute: (i) a locker, safe deposit box or beach cabana; (ii) storage space in part of a warehouse or in part of any other structure or area in which goods are stored; (iii) garage space or parking space in any part of a garage, of a parking lot or of a parking area where the entire garage, entire parking lot or entire parking area accommodates more than two motor vehicles; (iv) an occupancy of a type which customarily has not been the subject of such a common-law relationship of landlord and tenant. Thus, where the occupancy does not give rise to a common-law relation ship of landlord and tenant, the amount received for such occupancy may not be deducted from rent for the purpose of computing base rent subject to the tax, unless the occupancy is one for the conduct of business, in which case, the rent may be deducted by reason of the provisions of paragraph (1) above. (v) A civic organization enters into a lease with a sublessor of a building for a period of two years. Under the lease, the civic organization agrees to pay the lessor an annual rental of $3,000. The premises occupied by the civic organization does not constitute taxable premises. Accordingly, the rental paid by the civic organization to the sublessor may be taken as a deduction from the rent paid by the sublessor in determining the sublessors base rent. (vi) The lessee of a public garage rents space in the garage to a private individual for the storage of the latter's automobile which is devoted solely to personal use. The lessee, for the purpose of determining the amount of his base rent, may not deduct from the rent paid by him to his landlord the amounts received by him from the owner of the automobile for storage of the car. If the space were rented for the storage of motor vehicles used in business, such as trucks, the lessee would be permitted to deduct the amounts received by him for the storage of such trucks in arriving at the amount of his base rent unless the subtenant is exempt from tax thereon under 19 RCNY § 7-04(f). (vii) A broker holding securities for the account of its customers places such securities in a safe deposit box rented from a bank, for which the broker pays a fixed rental charge. The bank is a tenant of the premises. No common-law relationship exists between the bank and the broker. The rent received by the bank from the broker may be deducted from its rent for the purpose of computing its base rent subject to tax. The broker must report the rent paid by him to the bank as his base rent for the occupancy of the safe deposit box. Where the consideration paid or required to be paid by a tenant is for the use or occupancy of taxable premises and services, such as stenographic services, answering services, mail services and the like, furnished by the landlord or lessor, the total consideration paid or required to be paid shall be deemed to be base rent. However, if the agreement between the landlord or sublessor with the tenant separately states the amount of the consideration applicable to the rent for the premises and the amount applicable to the services, the amount applicable to the rent for the premises only shall be deemed to be base rent of the tenant. In such case the lessor, if a tenant, may deduct from his base rent the amount received from his tenant as such base rent. Where a theatre owner and a theatrical producer enter into an agreement for the rental of a certain theatre on the basis of what is commonly known as a "four wall contract," whereby the theatre owner, as landlord, merely leases the theatre building to the producer for a fixed rental, the amount of rent paid by the producer to the theatre owner constitutes base rent and is subject to the tax. Where a theatre owner and a theatrical producer enter into an agreement for the use of a certain theatre on the basis of what is commonly known as a "booking contract," whereby the theatre owner agrees to furnish to the producer a lighted, heated and cleaned theatre, with the scenery and equipment contained therein, the necessary stage hands, carpenters, electricians, property men, janitors, ushers, ticket sellers, doorkeepers, house orchestra, etc. for a percentage of the box office receipts, that portion of the receipts paid by the producer to the theatre owner which is applicable to the use or occupancy of the theatre shall be deemed to be base rent and subject to the tax. In such case, the burden of establishing the amount of the receipts not applicable to the use or occupancy of the theatre shall be on the producer. Where the rent paid for each taxable premises by a tenant to his landlord for a period is equal to, or is exceeded by, the amounts received by or due such tenant for the same period from any sublessees of all or any part of said premises, which are deductible in determining the base rent, the tenant is not required to pay any tax. However, both the tenant and sublessees are required to file returns for such periods. Nothing contained in these regulations shall be construed to permit a tenant to deduct the same rent from his base rent more than once. (7) (i) For tax periods beginning on and after June 1, 1967, whenever the rent paid by a tenant for his occupancy of taxable premises is measured in whole or in part by the gross receipts from his sales within such premises, his rent, to the extent paid on the basis of such gross receipts, shall not be deemed to exceed 15 percent of such gross receipts. This 15 percent limitation applies where the rental agreement provides for a rent based wholly or partly on a percentage of sales receipts and the stated percentage exceeds 15 percent. The maximum rent in such cases is the higher of 15 percent of gross receipts or the fixed rental plus 15 percent of sales subject to the percentage. To illustrate: (A) A tenant leases a store for an annual rental of 25 percent of his gross receipts from sales. The gross receipts for the year total $200,000 and the tenant pays his landlord $50,000. The rent subject to tax is $30,000 (15 percent of $200,000). (B) A tenant leases a store for an annual rental of $50,000 plus 25 percent of his gross receipts from sales in excess of $200,000. The gross receipts for the year total $300,000 and the tenant pays his landlord $75,000. The rent subject to tax is $65,000 ($50,000 fixed rental plus 15 percent of sales over $200,000). (ii) For taxable premises located in Manhattan north of 96th Street,or in the Bronx, Brooklyn, Queens or Staten Island, a deduction may be taken in computing base rent (after all other deductions and exemptions have been taken) as follows: For Tax Periods Reduction Beginning January 1, 1986 ending May 31, 1987 10% Beginning June 1, 1987 ending May 31,1989 20% Beginning on and after June 1, 1989 30% To illustrate: For the tax year June 1, 1986 through May 31, 1987, a tenant rents a store in Queens for $20,000 per year. He is permitted a 20% reduction in computing his base rent. His base rent is $16,000. Day. A "day" shall mean a calendar day or any part thereof. Dramatic or musical arts performance. "Dramatic or musical arts performance" shall mean a performance or repetition thereof in a theatre, opera house or concert of a live dramatic performance, whether or not musical in part. The performances encompassed by this definition include so-called legitimate theatre plays, musical comedies and operettas. They do not include circuses, ice skating shows or aqua shows; they do not include performances of any kind in a roof garden, cabaret or other similar place; and they do not include radio or television performances, whether or not such performances are prerecorded for later broadcast. Landlord. "Landlord" shall mean a person who grants the right to use or occupy premises to any lessee, sublessee, licensee or concessionaire, whether or not he is the owner of the premises. Person. "Person" shall mean an individual, partnership, society, association, joint stock company, corporation, estate, receiver, assignee, trustee or any other person acting in a fiduciary capacity, whether appointed by a court or otherwise, and any combination of individuals. Persons using or occupying two or more locations in the same premises. "Persons using or occupying two or more locations in the same premises" is where a person occupies or uses two or more locations in the same premises which under the law constitute taxable premises and for the occupancy or use of which he is subject to the tax, the aggregate of the rentals paid for all such locations in the same premises will be deemed to be rent paid for one taxable premises for the purpose of filing quarterly and final returns and computing the tax due thereon. Premises. "Premises" shall mean any real property or part thereof, and any structure thereon or space therein. Premises used for air transportation purposes. "Premises used for air transportation purposes" is the portion of any premises located within an airport or within an air transportation terminal shared by more than one airline, of any person actually operating an airline as a common carrier, used by such person for normal or necessary air transportation purposes. The words "normal or necessary air transportation purposes," as used in the definition, do not include any activities which are normally carried on by persons not engaged in furnishing air transportation service, such as the operation of retail stores, barber shops, restaurants, theatres, hotels and newsstands. Premises used for omnibus transportation purposes. "Premises used for omnibus transportation purposes" shall mean the portion of any premises located within a passenger terminal of any person actually operating an omnibus line or route as a common carrier, used by such person for normal or necessary omnibus line or route transportation purposes. The words "normal or necessary omnibus line or route transportation purposes," as used in this definition, do not include any activities which are normally carried on by persons not engaged in furnishing omnibus line or route transportation services, such as the operation of retail stores, barber shops, restaurants, theatres, hotels and newsstands. Premises used for railroad transportation purposes. "Premises used for railroad transportation purposes" shall mean the portion of any premises of any person actually operating a railroad, used by such person for normal or necessary railroad transportation purposes. The words "normal or necessary railroad transportation purposes," as used in this definition, do not include any activities which are normally carried on by persons not engaged in furnishing railroad transportation service, such as the operation of retail stores, barber shops, restaurants, theatres, hotels and newsstands; nor do such words include any activities which are not deemed transportation purposes under § 489-b and § 489-m of the New York Real Property Tax Law. Where a railroad company rents taxable premises for normal and necessary railroad transportation purposes and a part of such premises is leased by it to sublessees and concessionaires, the tax shall be applicable to so much of the rent paid by the railroad company to its landlord as is ascribable to the part leased by it to the sublessees and concessionaires, less the amounts received by or due the railroad company for the same period from its sublessees and concessionaires. Rent. The consideration paid or required to be paid by a tenant for the use or occupancy of premises, valued in money, whether received in money or otherwise, including all credits and property or services of any kind and including any payment required to be made by him on behalf of his landlord for real estate taxes, water rents or charges, sewer rents or any other expenses (including insurance) normally payable by a landlord who owns the realty other than expenses for the improvement, repair or maintenance of the tenant's premises. Included in rent but not limited thereto are payments of a fixed rental, a rental based on a percentage of sales or profits and other payments made as rent. Consideration for the occupancy of premises may be in a form other than money. It may consist, for example, of services rendered or property furnished by the tenant. If the occupancy is gratuitous and without consideration in any sense of the word, no tax is payable. With respect to the rent paid or required to be paid by a tenant-owner in a cooperative building, it is necessary to determine the nature of such rent. The following payments are deemed to be made as an owner, and not as a tenant, and therefore not includable in determining the amounts of rent paid: (1) The initial purchase price of the shares of stock or other evidence of the ownership of the tenant-owner. (2) Payments made by the tenant-owner as his share on account of the principal amount of any mortgage on the premises or on account of any interest on such mortgage. (3) Payments made by the tenant-owner as his share of the cost of capital improvements to the premises. (4) Payment made by the tenant-owner as his share of: (i) real estate taxes and assessments, and (ii) water rents or sewer rents. (5) Payments made by the tenant-owner as his share of the cost of insurance on the premises. (6) All other payments made by the tenant-owner which are in the nature of capital expenditures. The following payments made by the tenant-owner are includable as rent: (7) Payments made by a tenant-owner which are applicable to the operation of the premises, and are necessary for the occupancy and use by the tenant-owner, such as payments made for fuel, gas and electricity. (8) Operating and maintenance expenditures other than those deemed to be in the nature of capital expenditures, such as expenditures for normal repairs, salaries and wages paid to elevator operators and doormen, superintendents and other personnel for the proper functioning and use of the" premises by the tenant-owner. Any rent paid by a tenant shall be included as base rent and reported as such in the return for the period when paid. However, any rent due a tenant from his sublessee for the period for which a return is filed, whether or not actually received by the tenant during the period covered by the return, shall be deducted, if deduction is permitted, (See 19 RCNY § 7-01 "base rent") from the rent paid by the tenant during such period irrespective of the method of accounting employed by the tenant. The tenant may not again deduct such rent when received. Return. "Return" shall mean any return filed or required to be filed as herein provided other than an information return. Tax period. "Tax period" shall be the period for which any return is required to be filed under these regulations. Tax year. "Tax year" shall be June first of any calendar year through May thirty-first of the following calendar year. Taxable premises. "Taxable premises" shall mean any premises in the City occupied, used or intended to be occupied or used for the purpose of carrying on or exercising any trade, business, profession, vocation or commercial activity, including any premises so used even though it is used solely for the purpose of renting, or granting the right to occupy or use, the same premises in whole or in part to tenants; except premises within the area leased by the City of New York to the New York World's Fair 1964-1965 Corporation pursuant to Chapter 428 of the Laws of 1960, as amended, during the period of such lease. The following illustrate types of premises occupied by a tenant as taxable premises: (1) Premises occupied or used as leased departments in department stores, as florists, beauty parlors, barber shops, lunchrooms, shoe repairing shops, optometrists, or any other commercial activity. (2) Premises occupied or used in City parks, as restaurants, golf courses, archery ranges, boating concessions, or any other commercial activity. (3) Advertising signs on the tops of buildings or outside of buildings or structures, or located on otherwise unoccupied land. (4) Automobile parking lots and garages, tennis courts, skating rinks, baseball fields and other enterprises. (5) Business of any kind conducted by a tenant in premises used for both residential and business purposes to the extent that such premises is used for business purposes. (6) Safe deposit vaults rented as an incident to a business, such as the leasing of a safe deposit vault by a stockbroker for the safekeeping of securities. (7) Office space and desk space. (8) Premises occupied or used in ball parks, theatres, race tracks, etc. for the sale of refreshments, programs, or the checking of clothing. Premises not devoted to or intended for use in the conduct of a trade or business are not taxable premises. Premises used or occupied or intended to be used or occupied by a person or organization exempt from the tax under § 11-704(a)(4) of the Administrative Code are not taxable premises with respect to that person or organization. Tenant. A person paying or required to pay rent for premises as a lessee, sublessee, licensee or concessionaire. Such person shall include, but shall not be limited to, a corporation which leases the premises from another corporation of which the lessee corporation is a subsidiary or with which it is affiliated. Where a tenant leases premises for a consideration to other persons, the tax applies to the tenant and to his sublessees. Rent received or due from such sublessees may, with certain exceptions, be deducted by the tenant in computing his base rent subject to tax (see: 19 RCNY § 7-01 "base rent"). The owner of record of a building, who occupies space therein, is not deemed to be a tenant for purposes of the tax. However, in such case, proof of his ownership may be required, such as a receipt for a mortgage payment, last owner's card, or deed, etc. A tenant-stockholder or tenant-owner in a cooperative building who occupies premises in such building for the purpose of carrying on or exercising any trade, business, profession, vocation or commercial activity is subject to the tax.

19 RCNY § 7-02 Imposition of Tax.

§ 7-02 Imposition of Tax. In addition to any and all other taxes the law imposes a tax for each tax year beginning on or after June 1, 1963, on every tenant of taxable premises. For each tax year falling within the period beginning June 1, 1963 and ending May 31, 1970, the tax was imposed at the rate of 2 1/2 percent of the tenant's base rent for such tax year where his base rent did not exceed $2,500 per year, or where his base rent was for a period of less than one year and would not exceed $2,500 for a year if it were paid on an equivalent basis for an entire year; or at the rate of 5 percent of his base rent for such tax year where his base rent exceeded $2,500 per year, or where his base rent was for a period of less than one year and would exceed $2,500 a year if it were paid on an equivalent basis for an entire year. For each tax year commencing on or after June 1, 1970 and ending on or before May 31, 1977, every tenant was required to pay a tax at the rates shown in the following table: When the base rent was: But not more than: The rate was: 0 $2,499 2 1/2% of the rent $2,500 or over $4,999 5% of the rent $5,000 or over $7,999 6 1/4% of the rent $8,000 or over $10,999 7% of the rent $11,000 or over 7 1/2% of the rent For tax years beginning on or after June 1, 1977 and ending on or before May 31, 1980, the tax was imposed at rates equal to 90 percent of the rates shown in the above table. For the tax year beginning June 1, 1980 and ending May 31, 1981, the tax was imposed at rates equal to 85 percent of the rates shown in the above table. For tax years beginning on or after June 1, 1981, the tax is imposed on every tenant having base rent in excess of $4,999 per year at the rates shown in the following table: When the base rent is: But not more than: The rate shall be: $5,000 or over $7,999 5% of the rent $8,000 or over $10,999 5.6% of the rent $11,000 or over 6% of the rent (See 19 RCNY § 7-04(f) for exemption from tax where base rent is under prescribed amounts.) Where the rent is for a period of less than one year, the rate shall be determined by assuming that the rent is on an equivalent basis for the entire year. Example 1: A tenant occupies a store for business purposes, for which his base rent is $16,000 for the tax year. The applicable rate of tax is 6 percent. The tax due is $960 (6% × $16,000) for the tax year. Example 2: A tenant occupies a boardwalk concession during the months of June, July, August and September, for which his base rent is $4,000. Since his base rent, if paid on an equivalent basis for the entire year, would amount to $12,000 ($4,000 ÷ 4) × 12), the applicable rate of tax is 6 percent. The tax due is 6 percent of $4,000 base rent, or $240. Example 3: A tenant conducts his business in two stores, one located in Brooklyn, the other in Manhattan. The base rent for the Manhattan store is $16,000 for the tax year while the base rent for the Brooklyn store is $4,500. The tax is computed separately for each taxable premises. The rate of 6% applies to the base rent paid for the Manhattan store while no tax is due on the base rent paid for the Brooklyn store, since it does not exceed $4,999. (See 19 RCNY § 7-04(f) for exemption from tax where base rent is under prescribed amounts.) Where a tenant pays an undivided rent for premises used by him for both residential purposes and as taxable premises, the tax is applicable to so much of the rent as is ascribable to the portion of such premises used as taxable premises. Where, however, the rent ascribable to so much of such premises as is used as taxable premises does not exceed $50 a month, such rent is to be excluded from such tenant's base rent. However, this shall not be construed to exclude any base rent from tax merely because it is paid as part of an undivided rent for premises which are only partially used as taxable premises. (For tax years beginning on or after June 1, 1981, no tax will be due if the rent ascribable to the portion of the premises used as taxable premises does not exceed the amounts prescribed in 19 RCNY § 7-04(f).) Example 4: An artist rents a three-room apartment in a residential building for which he pays rent of $1,200 for the tax year beginning June 1, 1977. He uses one room as a studio and the other two rooms as living quarters. For federal income tax purposes, he deducts $400 as his annual rent for the studio used in his work. Since the rent ascribable to the part of the premises used as taxable premises does not exceed $50.00 a month, the rent so ascribable is to be excluded from the tenant's base rent, and the tax is not imposed with respect to his occupancy of the premises. Example 5: A dentist is the tenant of a five-room apartment in a residential building, for which he pays rent of $30,000 per year. He uses two of the rooms for professional purposes and the other three rooms as a personal residence. In determining his federal income tax, he deducts two-fifths of his total rent, or $12,000, as rent ascribable to the part of the apartment devoted to his professional pursuits. For the purpose of the tax, it will be conclusively presumed against the tenant that the base rent of his taxable premises is $12,000, and the tax due is $720 (6% × 12,000). Nothing in the law shall be deemed to require payment of a double or multiple tax pursuant to said law on any part of any taxable premises. Thus, where a tenant sublets the entire taxable premises to another person who is liable for payment of the tax, such tenant is not required to pay the tax on the amount of rent paid to him by the subtenant. This section shall not be construed as permitting base rent of a tenant for one taxable premises to be reduced by deducting rents received by him for another taxable premises of which he is also a tenant.

19 RCNY § 7-03 Deductions from Base Rent.

§ 7-03 Deductions from Base Rent. Base rent shall be reduced by the amount of the taxpayer's rent for, or reasonably ascribable to, the taxpayer's own use of the premises: (a) As premises used for railroad transportation purposes. (b) As premises used for air transportation purposes. (c) As premises used for omnibus transportation purposes. (d) As piers insofar as such premises are used in interstate or foreign commerce. (e) Which are located in, upon, above or under any public street, highway or other public place, and which are defined as special franchise property in the New York Real Property Tax Law. (f) Which are taxed pursuant to the Tax on Occupancy of Hotel Rooms Law imposed by Chapter 25 of Title 11 of the Administrative Code of the City of New York or, effective August 1, 1965, pursuant to the Sales Tax imposed by Subchapter 1 of Chapter 20 of Title 11 of the Administrative Code of the City of New York, to the extent that such premises are subject to and during the period that they are subject to, such tax. (g) Which are taxed pursuant to § 11-1005(b) or (c) of the Administrative Code (premises occupied by vending machines). This provision is applicable to tax periods ending on or before July 15, 1981, after which date the general occupancy tax Chapter 10 of Title 11 is no longer imposed. (h) Which are advertising signs, advertising space, vending machines or newsstands within or attached to stations, platforms, stairways, entranceways, passageways, mezzanines or tracks of a rapid transit subway or elevated railroad operated by the New York City Transit Authority when the rent of the tenant or of his landlord is payable to such Authority.

19 RCNY § 7-04 Exemptions.

§ 7-04 Exemptions. The following are exempt from the payment of the tax: (a) The State of New York, or any public corporation (including a public corporation created pursuant to agreement or compact with another state or the Dominion of Canada), improvement district or other political subdivision of the State; (b) The United States of America, insofar as it is immune from taxation; (c) The United Nations or other worldwide international organizations of which the United States of America is a member; and (d) Any corporation, or association, or trust, or community chest, fund or foundation, organized and operated exclusively for religious, charitable, or educational purposes, or for the prevention of cruelty to children or animals, and no part of the net earnings of which inures to the benefit of any private shareholder or individual and no substantial part of the activities of which is carrying on propaganda, or otherwise attempting to influence legislation; provided, however, that nothing in this paragraph shall include an organization operated for the primary purposes of carrying on a trade or business for profit, whether or not all of its profit are payable to one or more organizations described in this paragraph. (e) Any tenant who would be subject to tax under the law aggregating no more than $1.00 for a tax year with respect to all taxable premises used by him. To illustrate: A tenant has desk space in an office which he is entitled to use for one day each week during the tax year beginning June 1, 1976, for which he pays $3.25 per month, or $39.00 a year. Since the tax on $39.00 is $.98 (2 1/2% × $39.00), which is less than $1.00 for the tax year, the tenant is exempt from the payment of such tax with respect to taxable premises used by him. (f) (1) A tenant who uses premises for no more than fourteen days in a tax year whether or not consecutive, where his agreement with his landlord does not require him to pay rent for a longer period with respect to the rent paid by him for such premises. To illustrate: Under an agreement entered into by a tenant with his landlord, the tenant has the right to use office space on the landlord's premises for one day a week for a period of one year, for which he is required to pay rent of $20.00 for each such day. Under the agreement, the tenant has the right to terminate his occupancy at any time before the end of the year without the payment of any additional rent. After the tenth day of occupancy, the tenant terminates his occupancy. Since the total occupancy of the tenant is not more than fourteen days, viz., ten days, and the tenant is not required to pay additional rent for a longer period, he is exempt from paying the tax with respect to the rent paid by him for such premises. (2) A tenant whose base rent is not more than the following amounts during the periods specified: (i) For tax years beginning on or after June 1, 1981 and ending on or before May 31, 1984.....$4,999 (ii) For the tax year beginning June 1, 1984 and ending May 31, 1985.....$7,999 Note: A tenant whose base rent for this tax year is not in excess of $10,999, is exempt from tax for the period beginning December 1, 1984 and ending May 31, 1985. (iii) For tax years beginning on or after June 1, 1985.....$10,999 In determining whether this exemption applies in a case where the base rent of a tenant is for a period of less than one year, such base rent must be determined as if it had been paid on an equivalent basis for the entire year. To illustrate: A tenant rents a store during the months of June, July and August, for which his base rent is $4,000. Since his base rent, if paid on an equivalent basis for the entire year, would amount to $16,000 ($4,000 ÷ 3) × 12), he is not exempt from the tax. (g) A tenant who uses taxable premises for renting to others for residential purposes to the extent of 75 percent or more of the rentable floor space is exempt from the tax imposed by the law with respect to the rent paid for such premises from the time that construction thereof commenced, provided, however, that this paragraph shall not be applicable to hotels, apartment hotels or lodging houses as defined in Chapter 25 of Title 11 of the Administrative Code of the City of New York or, effective August 1, 1965, in Subchapter 1 of Chapter 20 of Title 11 of the Administrative Code of the City of New York. Example 1: On June 1, 1963, a builder leases a plot of land for ninety-nine years. Under the terms of the lease, the builder has the right to, and does, construct an apartment house for residential purposes. The builder pays the landlord an annual rent of $100,000. On December 1, 1963, the builder commences the construction of the apartment house. When the building is completed, it will contain apartments available for residential purposes to the extent of 80 percent of the rentable floor space in the building. The builder is required to pay the tax on the rent due the landlord for the period from June 1, 1963 to December 1, 1963. The builder is exempt from paying the tax with respect to the rent paid for the premises from the time that construction of the building commenced, viz., December 1, 1963. Nevertheless, such builder is required to file an information return as provided for in these regulations. The foregoing exemption similarly applies to a lessee of a building erected prior to the time he became such lessee, and which building is rented to others for residential purposes to the extent of 75 percent or more of the floor space thereof. Example 2: A real estate concern becomes the lessee of an apartment house erected in 1950. The apartment house contains 100,000 square feet of rentable floor space, of which 80,000 square feet are for residential purposes. The real estate concern is exempt from the payment of the tax on the rents paid by it, but, nevertheless, is required to file an information return as provided in these regulations. (h) A tenant who uses taxable premises for a dramatic or musical arts performance for less than four weeks where there is no indication prior to or at the time such performance commences that the performance is intended to continue for less than four weeks. Example 1: A producer of a play rents a theatre for the production of the play for a period of twelve weeks. The play is not a success, and the producer closes down the show at the end of the three weeks. The producer is exempt from the payment of the tax with respect to the rent paid by it for the use of the theatre. (i) (1) A tenant that uses taxable premises for the production and performance of a theatrical work shall be exempt with respect to the rent paid for such taxable premises for a period not exceeding 52 weeks beginning on the date that the production of that theatrical work commences in New York City. (2) The term "theatrical work" shall mean a performance or repetition thereof in a theater of a live dramatic performance (whether or not musical in part) that contains sustained plots or recognizable thematic material, including so-called legitimate or experimental theater plays or musicals, dramas, melodramas, comedies, compilations, farces, reviews or dance plays, provided that such performance is intended to be open to the public for at least two weeks. The term "theatrical work" shall not include performances of any kind in a roof garden, cabaret or similar place, circuses, ice skating shows, aqua shows, variety shows, magic shows, animal acts, concerts, industrial shows or similar performances, or radio or television performances, whether or not such performances are pre-recorded for later broadcast. (3) The date that the "production of a theatrical work commences" is the date that a taxable lease of the taxable premises commences. For purposes of this paragraph (3), a "taxable lease" is a lease with respect to which: (i) the tenant is not exempt from tax under § 11-704(a) paragraphs (1) through (4) of the Administrative Code; and (ii) the rent paid is subject to tax or would be subject to tax if it were greater than the amount that is exempt under § 11-704(b)(2) of the Administrative Code. (4) If a theatrical work has been previously produced and performed in New York City, a determination whether a subsequent production, e.g., a revival, is entitled to the 52-week exempt period will be based on all the facts and circumstances, including, but not limited to, the identity of the theatrical work (theatrical works will be distinguished from other theatrical works under the standards used to determine whether a work constitutes "an original work of authorship" as used in § 102(a) of title 17 of the United States Code, whether or not the theatrical work is subject to a copyright under the provisions of that title), the identity of the tenant, the identities of other participants in the production (e.g., the producer, executive producer, director or designers), changes to the production (e.g., changes to the script, sets, or musical numbers), and public statements about the production. This paragraph will apply both when the previous production and performance of the theatrical work has closed and when a new tenant takes over the production and performance of the theatrical work. (5) The 52-week exempt period will continue without interruption during periods when performances of the theatrical work are temporarily suspended. (6) A production of a theatrical work will be entitled to only one 52-week exempt period. If the same theatrical work is produced and performed by the same tenant at more than one taxable premises simultaneously, the 52-week exemption period can be applied to only one taxable premises at any given time. (7) The 52-week exempt period provided by this subdivision (i) will not apply to any theatrical work the production of which commenced before June 1, 1995. (8) The following examples illustrate this subdivision (i): Example (i): Effective January 1, 2005, Theatrical Production Company K leases Theater A in Manhattan below the center line of 96th Street to produce and perform Theatrical Work X, a theatrical work that had never previously been produced and performed in New York City. Production Company K uses the theater for rehearsals and previews and Theatrical Work X opens on February 1. The rent for Theater A is $250,000 annually. The 52-week exemption period begins on January 1, 2005. Example (ii): The facts are the same as in Example (i), except that Production Company K produced and performed Theatrical Work X for three months in New Haven before it leased Theater A to produce and perform that work in the City. The period of production and performance outside of the City is not included in the 52-week period. The 52-week exemption period begins on January 1, 2005. Example (iii): The facts are the same as in Example (i), except that from November 1 until December 31, 2004, Production Company K produced and performed Theatrical Work X in Brooklyn before opening in Theater A on January 1, 2005. Because the rent paid to lease the theater in Brooklyn was not subject to tax under § 11-704(h)(1) of the Administrative Code, the 52-week exemption period begins on January 1, 2005. Example (iv): The facts are the same as in Example (i), except that on June 15 Production Company K stops performances of Theatrical Work X at Theater A, and Production Company K's lease of Theater A is terminated as of June 30. Production Company K leases Theater B for $260,000 annually beginning July 1, and soon thereafter, begins performances of Theatrical Work X at Theater B. The exemption period will end 52 weeks after January 1, 2005 and will apply to the rent paid by Production Company K to lease Theater A from January 1 to June 30 and the rent paid to lease Theater B from July 1 until the end of the exemption period. The exemption period includes the period from June 16 to June 30 when there are no performances. Example (v): The facts are the same as in Example (iv), except that the rent Production Company K paid to lease Theater A was less than $250,000 on an annualized basis. Annualized rent of less than $250,000 is exempt from tax under § 11-704(b)(2)(x) of the Administrative Code. Under paragraph (3) of this subdivision, Company K's lease of Theater A is a taxable lease for purposes of this section. As a result, the exemption period will end 52 weeks from January 1, 2005. Example (vi): The facts are the same as in Example (iv), except that Production Company K's lease of Theater A continues until July 31. Although Production Company K is paying rent on both Theater A and Theater B for the month of July, under paragraph (6) of this subdivision, the exemption applies to only one taxable premises at a time. Because Theatrical Work X is being produced and performed at Theater B during July, the exemption applies to the rent for Theater B during July. As a result, the exemption period will end 52 weeks from January 1, 2005 and will apply to the rent paid by Production Company K to lease Theater A from January 1 to June 30 and the rent paid to lease Theater B from July 1 until the end of the exemption period. Example (vii): The facts are the same as in Example (i), except that Theatrical Work X is a revival of a theatrical work that was produced and performed in the City by Theatrical Production Company L, opening in 1975 and closing in 1977. Production Companies K and L are unrelated, and none of the participants involved in Company K's production were involved in the 1975 production. Based on the facts and circumstances, under paragraph (4) for purposes of this subdivision, the production of Theatrical Work X by Production Company K is considered to commence on January 1, 2005. Example (viii): The facts are the same as in Example (iv), except that on June 15 Production Company K stops performances of Theatrical Work X at Theater A. On July 1, Production Company L leases Theater B, and soon thereafter, begins performances of Theatrical Work X at that theater. Theatrical Work X, as performed at Theater B, constitutes the same "original work of authorship" as used in § 102(a) of title 17 of the United States Code, as it was when it was performed at Theater A. The majority of the principals of Production Company K were involved in Production Company L, but a few principals are different. There were only minor changes in the cast, script, and sets. The producer, director and set designer are the same. Production Company L refers to the production at Theater A in promotional material for Theatrical Work X. Based on all the facts and circumstances, for purposes of this subdivision (i), the production of Theatrical Work X is considered to have commenced on January 1, 2005, and will be considered to continue when production is taken over by Production Company L. A new exemption period does not begin when Production Company L leases Theater B to produce and perform Theatrical Work X. As a result, the rent Production Company L pays to lease Theater B is exempt from tax from July 1 until 52 weeks from January 1, 2005. Example (ix): The facts are the same as in Example (viii), except that Production Company K was a nonprofit entity exempt from tax under § 11-704(a)(4) of the Administrative Code. Under paragraph (3) of this subdivision, the production of a theatrical work commences when a lease commences with respect to which the rent paid is subject to tax. Because the rent Company K paid to lease Theater A was not subject to tax, the production of Theatrical Work X commences on July 1, 2005. As a result, the rent Production Company L pays to lease Theater B is exempt from tax for 52 weeks beginning on July 1, 2005.

19 RCNY § 7-05 Application for Exemption.

§ 7-05 Application for Exemption. A person claiming exemption from the commercial rent or occupancy tax under § 11-704(a)(4) of the Administrative Code may make application for such exemption to the Commissioner. A person claiming that certain premises used by a nonprofit organization are not taxable premises may make an application to the Commissioner for a determination of whether such premises are taxable. The Commissioner, if satisfied that the applicant is entitled to the exemption or that the premises in question are not taxable, will issue a letter to that effect to the applicant. A corporation or unincorporated entity organized and operated for nonprofit purposes, making an application for exemption under § 11-704(a)(4) of the Administrative Code or claiming premises not to be taxable premises under 19 RCNY § 7-01, is required to submit an affidavit which shall set forth the following: (a) The type of organization using the premises; (b) The purposes for which it is organized; (c) Its actual activities; (d) The source and disposition of its income; (e) Whether or not any of its income is credited to surplus or may inure to any private stockholder or individual; and (f) Such other facts which may affect its right to exemption including, in the case of a claim that certain premises are not taxable premises, a description of the activities carried on at the premises by the organization and a description of any sublease or other arrangement whereby any other person or entity occupies or uses the premises. The affidavit must be supplemented by a copy of the articles and certificate of incorporation, or articles of association, as the case may be, a copy of the by-laws of the organization, a financial statement showing its assets and liabilities for the most recent year a statement of its receipts and disbursements for the most recent year and a copy of its federal, state and city income tax returns for the most recent three years, and a photostatic copy of the letter, if any, from the United States Treasury Department granting the organization exemption from federal income taxation.

19 RCNY § 7-06 Presumptions and Burden of Proof.

§ 7-06 Presumptions and Burden of Proof. It shall be presumed that all premises are taxable premises and that all rent paid or required to be paid by a tenant is base rent until the contrary is established, and the burden of proving that such presumptive base rent or any portion thereof is not included in the measure of the tax imposed by the law is on the tenant. Where a tenant uses premises both for residential purposes and as taxable premises and the tenant pays an undivided rent for the premises so used, it shall be conclusively presumed against such tenant that the rent ascribable to so much of such premises as is used as taxable premises shall be the amount which such tenant deducts as rent for such premises in determining his federal income tax (as reduced by any disallowance of such deduction which is not being contested) which is fairly attributable to the tax period or tax year. Where a tenant operating a garage or parking lot assigns specific space therein to another person for the parking of a motor vehicle used by the latter in the conduct of a trade, business, profession, vocation or commercial activity, the garage or parking lot operator may be permitted to deduct the amounts received by or due him for such space. To claim such deductions each such garage or parking lot operator is required to take from such other person, in good faith, and at the time the space is assigned, a Certificate of Assigned Space Use in the form of the certificate hereafter set forth. Unless the operator of a garage or parking lot shall have taken a completed certificate as described, and shall have signed the certificate, the presumption of law with respect to taxability shall prevail. Operators are required to retain such certificates and make them available to the Department of Finance on request therefor. Note: This deduction is not permitted where the tenant of the parking space is exempt from tax under 19 RCNY § 7-04(f). CERTIFICATE OF ASSIGNED SPACE USE Date ______________________________ Name of Garage ______________________________ Operator ______________________________ Address of Garage ______________________________ The undersigned hereby certifies that he (it) has been assigned and is using specific space at the above garage or parking lot for a monthly or longer term, for the parking of a motor vehicle used in the conduct of a business or profession, as follows: Assigned Space ________________ Vehicle Reg. No. ____________________ Stall or Lane No. The foregoing statements are true: ______________________________ ______________________________ Signature of Vehicle Owner Signature of Garage Operator ______________________________ Address _________________ __________________ Type of Business Comm. Rent Reg. No. Note: A vehicle owner engaged in commercial activity and occupying space in a garage is subject to the Commercial Rent or Occupancy Tax Law and is required to file returns and pay the tax imposed by said Law. An organization that the Internal Revenue Service has determined to be exempt from federal income taxation pursuant to subsection (a) of § 501 of the Internal Revenue Code, other than organization described in paragraph (2) or (25) of subsection (c) of such section 501, will be deemed to have rebutted the presumption that premises occupied or used by such organization are taxable premises with respect to that organization, provided the premises are not used substantially in connection with an unrelated trade or business, as described in § 513 of the Internal Revenue Code. Such premises will be presumed not to be taxable premises with respect to that organization and the burden of proving that premises used or occupied by such an organization are taxable premises is on the Commissioner. However, if such premises are used substantially in connection with an unrelated trade or business, the presumption of taxability remains in effect and the burden of proving the premises are not taxable remains on the organization. An organization exempt from federal income taxation under subsection (a) of § 501 of the Internal Revenue Code, other than an organization described in § 501(c)(2) or (25) of the Internal Revenue Code, will be deemed to have rebutted the presumption of taxability of premises used or occupied by such organization notwithstanding that such premises are subleased in whole or in part by such organization, provided that rent received by such organization from such sublease qualifies for exclusion from unrelated business taxable income under subsection (b)(3) of § 512 of the Internal Revenue Code determined without regard to subdivisions (4) and (13) of that subsection. In determining whether premises occupied, used or intended to be occupied or used by a nonprofit organization will be considered to be used substantially in connection with an unrelated trade or business, consideration will be given to all of the facts and circumstances of each case, which may include, but are not limited to, the following factors: the portion of the square footage used in connection with the unrelated trade or business, the portion of gross receipts derived from unrelated business activities at the premises, and the number of personnel at the premises engaged in unrelated business activities. The following examples illustrate the foregoing: Example 1: X Corp. is a nonprofit organization exempt from federal income tax under Internal Revenue Code § 501(c)(4). As part of its nonprofit activities, X Corp. publishes a magazine on topics related to its exempt purpose that carries advertisements of a general nature. The income from selling advertising space in the magazine is subject to tax as income from and unrelated business. Fifty percent (50%) of the staff located at premises rented by X Corp. in New York City are exclusively engaged in selling advertising space in the magazine. On the basis of the facts of this case, the premises will be considered to be used substantially in connection with an unrelated business and X Corp. will not be deemed to have rebutted the presumption that those premises are taxable premises. Example 2: Y Corp. is a nonprofit organization exempt from federal income tax under Internal Revenue Code § 501(c)(4). Y Corp. enters into a lease of office space in New York City. Before the commencement of the lease term, Y Corp. determines that it does not require all of the space it leased and, therefore, Y Corp. immediately subleases 60 percent of the space to another organization exempt from federal income tax under Internal Revenue Code § 501(c)(4). The rent received from the sublease is not subject to federal income tax as income from an unrelated trade or business. Of the remaining 40 percent of the space, Y Corp. uses one half in connection with an unrelated trade or business and one half in connection with its nonprofit activities. Because 80 percent (60 percent plus 1/2 of 40 percent) of the total space leased by Y Corp. is not used in connection with an unrelated trade or business, Y Corp. will be deemed to have rebutted the presumption that the premises are taxable premises. Nothing in this § 7-06 shall be construed to subject to the commercial rent or occupancy tax imposed by Chapter 7 of Title 11 of the Administrative Code persons or organizations exempt from the tax under § 11-704(a)(4) of the Administrative Code. See 19 RCNY § 7-04.

19 RCNY § 7-07 Filing of Returns.

§ 7-07 Filing of Returns. (a) Every tenant subject to the tax is required to file with the Commissioner of Finance a return with respect to the taxes payable for the three month periods ending on the last days of August, November and February of each year, and a final return with respect to the taxes payable for the tax year ending on the last day of May of each year. For tax years ended on or before May 31, 1981, a tenant was required to file only a final return covering taxes payable for the tax year ending on the last day of May if: (a) the base rent payable for the tax year did not exceed $2,500 per year, (b) he occupied not more than one taxable premises, and (c) there were no allowable deductions from rent paid by the tenant. For tax years beginning on or after June 1, 1981, and ended on or before May 31, 1984, a tenant who was exempt from the tax because his base rent did not exceed $4,999 per year, was required to file a final return if his annual rent, without regard to any deduction allowed under the law, was $5,000 or more, or, irrespective of the amount of his annual rent, if the whole or any part of the premises rented to him was sublet to another. For tax years beginning on or after June 1, 1984, a tenant who is exempt from the tax under 19 RCNY § 7-04(f)(2) must file a final return. He must also file quarterly returns if he subleases all or part of his premises to another or his annual rent without deductions under the law is $11,000 or more. Such returns must be filed within twenty days from the expiration of the period covered thereby whether or not any tax is due. The form of return is prescribed by the Commissioner of Finance and requires the furnishing of such information as he deems necessary for the proper administration of the law. The Commissioner may also require amended returns to be filed within twenty days after notice, and to contain the information specified in the notice. Every owner of premises who grants the right to use or occupy taxable premises to any other person is required to file an information return as to each taxable premises on a form prescribed by the Commissioner of Finance, whether or not a tax is due and payable under the law by any of his tenants. The information return requires the furnishing of such information as the Commissioner of Finance deems necessary for the proper administration of the law. Such information returns must be filed upon such dates or at such times as the Commissioner of Finance may specify. The Commissioner of Finance may also require amended information return to be filed within twenty days after notice and to contain information specified in the notice. Where a new building is constructed having taxable premises, or if any part of an existing building becomes taxable premises, such a return must be filed within twenty days from the expiration of the tax period during which the first occupancy or use occurs. A return filed by a partnership must be signed by a partner or duly authorized agent having knowledge of the facts; a return of a corporation or other organization by an officer, agent or member thereof duly authorized to sign the same and having knowledge of the facts contained therein. A change of business organization from individual proprietorship to partnership or corporation, or otherwise, constitutes a change of taxable entity and a separate return must be filed and tax paid by such separate entity. A termination of business, or removal from the premises, or change of name, should be reported promptly to the Commercial Rent Registration Unit, 25 Elm Place, 3rd Floor, Brooklyn, New York 11201. If a person required to file a return does not receive a tax return from the Department of Finance, he should apply to the Commercial Rent Registration Unit, 151 West Broadway, New York, N.Y. 10013, for the necessary form. Returns should be mailed to the address designated on the return form or delivered to a borough office of the Bureau of City Collections. (b) Electronic filing. Pursuant to 19 RCNY § 17-03, the Commissioner may authorize the electronic filing of returns and reports required by this section.

19 RCNY § 7-08 Identifying Numbers.

§ 7-08 Identifying Numbers. Every person required to file a tax return, information return, certificate or other document pursuant to the law or these regulations shall include thereon an identifying number in the form of his federal employer identification number or, if no such number has been assigned, his social security account number, for purposes of proper identification. Every landlord of taxable premises required to file an information return or tax return, providing information relating to his tenants, shall identify each such tenant by name and identifying number when so required by the forms and instructions relating thereto. For this purpose, every tenant of taxable premises shall furnish to his landlord, and every landlord or taxable premises shall request and keep a record of, such tenant's identifying number.

19 RCNY § 7-09 Extension of Time for Filing of Returns.

§ 7-09 Extension of Time for Filing of Returns. (a) For cause shown, the Commissioner may grant an extension of time not exceeding ninety days within which to file any return under the law. An application for such extension must be made in writing prior to the due date of a return. Where an extension of time is granted, the taxpayer is nevertheless required to file a tentative return on or before the due date of the return. The tentative return must show the estimated tax due which must be paid at the time of filing of the tentative return. A final return must be filed on or before the date of expiration of the period of time granted. The balance of the tax due, plus interest thereon at the rate prescribed by law, computed from the due date of the return, must be paid at the time of filing the final return. (b) Electronic filing. Pursuant to 19 RCNY § 17-03, the Commissioner may authorize the electronic filing of requests for extension required by this section.

19 RCNY § 7-10 Payment of Tax.

§ 7-10 Payment of Tax. (a) Every person subject to tax is required to pay the City Collector the tax imposed by the law, on or before the 20th day of the calendar month following the end of each tax period, as follows: The tax to be paid at such time shall be based on the base rent of such tax period and the rate of tax shall be the one which would be applicable if the base rent for such period were the same for each tax period during the tax year, except that the payment required to be made together with the final return or at the time that the final return should be filed shall be the amount by which the actual tax for the tax year exceeds the amounts previously paid for the tax year. Example 1: Under the terms of a lease entered into by A, a tenant, with B, his landlord, for a tax year beginning on or after June 1, 1985, A agrees to pay B an annual rent of $14,000, as follows: Tax Periods Base Rent June, July and August $2,000 September, October and November $3,000 December, January and February $4,000 March, April and May $5,000 TOTAL $14,000 Since the rent paid for the three months of June, July and August is $2,000, such amount is deemed to be the rent payable in each tax period during the tax year. Since the annualized rent payable on this basis ($2,000 × 4 = $8,000) is not in excess of $10,999, no tax is payable for the period; nevertheless a quarterly return must be filed for June, July and August since the annual rent exceeds $11,000 (see 19 RCNY § 7-07). Since the rent paid for the three months of September, October and November is $3,000 the rent payable on this basis for the year would be $12,000 ($3,000 × 4). The tax rate applicable would be 6 percent and the tax payable would be $180 (6% × $3,000). For the three months, December, January and February, the rate of tax applicable would also be 6 percent, and the tax payable would be $240 (6% × $4,000). In filing the final return, the total rental for the tax year to be shown on the return is $14,000. The rate of tax applicable thereto is 6 percent, and the tax payable thereon would be $840 (6% × $14,000). Since the tax previously paid is $420, the balance of the tax payable with the final return is $420 ($840 - $420). Where the final return shows that the amount of the tax paid for the tax year exceeds the actual tax for such year, the Commissioner of Finance will make the appropriate refund as promptly as possible, provided, however, that where the Commissioner of Finance has reason to believe that the final return is inaccurate, he may withhold the refund in whole or in part. The making of the refund pursuant to this paragraph will not prohibit the Commissioner of Finance from making a determination that additional tax is due or from pursuing any other method to recover the full amount of the actual tax due for the tax year. Where a tenant ceases to do business, the tax, as measured by his base rent for the prior part of the tax year shall be due immediately and he shall file a final return within twenty days after he ceases to do business. However, should he continue to pay rent for the taxable premises, he must file the normally required returns and a final return for the tax year, provided, however, that any such tax payment shall be applied in reduction of the tax payments required to be made with such returns or with the final return for such tax year. Example 2: B, a tenant of taxable premises, ceases to do business on November 1, 1963. B, however, continues to pay rent to May 31, 1964. B is required to file a quarterly return for the three months of June, July and August, 1963, and pay the tax due thereon, and a final return within twenty days for the months of September and October, 1963, on or before November 21, 1963. B is also required to file a return for the three months of September, October and November, 1963 and pay the tax due thereon less the tax previously paid for the months of September and October, 1963. He also is required to file a quarterly return for the months of December, January and February, and a final return for the tax year ending May 31, 1964. The tax may be paid by check, post office money order, express company money order, bank draft, or cash. Postage stamps will not be accepted in payment of the tax. If payment is made by check, money order or draft and a receipt is requested, a duplicate copy of the return must also be submitted, accompanied by return postage, and the duplicate copy will be receipted by the City Collector's cashier, indicating that payment has been made, and returned to the taxpayer. Cash payments will be accepted only at the borough offices of the Bureau of City Collections, by a cashier, before 3 p.m. Monday through Friday. Under no circumstances should cash be sent by mail. Where a cash payment is made at a borough office of the Bureau of City Collections, a duplicate copy of the return in addition to the original thereof must be submitted and the duplicate copy will be receipted by the cashier indicating that payment has been made. (b) Electronic payment. Pursuant to 19 RCNY § 17-03, the Commissioner may authorize the electronic payment of any tax required to be paid by this section.

19 RCNY § 7-11 Records To Be Kept.

§ 7-11 Records To Be Kept. Every landlord of taxable premises and every tenant of taxable premises shall keep records identifying each tenant, the rent required to be paid, the rent paid and received, the location of each premises, and the periods of commencement and termination of every occupancy. In addition, such persons are required to keep all leases or agreements which fix the rents or rights of tenants of taxable premises, and such other records, receipts and other papers relevant to the ascertainment of the tax due under the law. Such records shall be offered for inspection and examination at any time upon demand by the Commissioner of Finance or his duly authorized agent or employee and must be preserved for a period of three years, except that the Commissioner may consent to their destruction within that period or may require that they be kept longer, and except further that leases or agreements which fix the rents or rights of a tenant shall be kept for a period of three years after the expiration of the tenancy thereunder.

19 RCNY § 7-12 Determination of Tax.

§ 7-12 Determination of Tax. If a return required by the law is not filed, or if a return when filed is incorrect or insufficient, the Commissioner of Finance will determine the amount of tax due from such information as may be obtainable and, if necessary, may estimate the tax on the basis of external indices. Notice of such determination will finally and irrevocably fix the tax unless the person against whom it is assessed, within thirty days after the giving of notice of such determination, shall apply in writing to the Commissioner of Finance for a hearing or unless the Commissioner of Finance of his own notion shall redetermine the tax. After such hearing the Commissioner will give notice of his determination to the person against whom the tax is assessed. The determination of the Commissioner of Finance shall be reviewable for error, illegality or unconstitutionality or any other reason whatsoever by a proceeding under Article 78 of the Civil Practice Law and Rules if application thereof is made to the Supreme Court within thirty days after the giving of the notice of such final determination. A proceeding under Article 78 of the Civil Practice Law and Rules shall not be instituted unless (a) the amount of any tax sought to be reviewed, with interest and penalties thereon, if any, shall be first deposited and there is filed an undertaking with the Commissioner of Finance issued by a surety company authorized to transact business in this State and approved by the Superintendent of Insurance of this State as to solvency and responsibility as a Justice of the Supreme Court shall approve to the effect that if such proceeding be dismissed or the tax confirmed the petitioner will pay all costs and charges which may accrue in the prosecution of the proceeding or (b) at the option of the petitioner such undertaking must be filed with Commissioner of Finance in a sum sufficient to cover the taxes, penalties and interest stated in such determination plus the costs and charges which may accrue against it in the prosecution of the proceeding, in which event the petitioner shall not be required to pay such taxes, interest or penalties as a condition precedent to the application.

19 RCNY § 7-13 Refunds.

§ 7-13 Refunds. The Commissioner of Finance will refund or credit, without interest, any tax, penalty or interest erroneously, illegally or unconstitutionally collected or paid if written application to the Commissioner of Finance for such refund shall be made within eighteen months from the date fixed by the law for filing the return on which such payment was based or within six months of the payment thereof, whichever of such periods expire later. The Commissioner of Finance may, in lieu of any refund required to be made, allow credit therefor on payments due from the applicant. In such case, the person to whom the credit is allowed shall attach to any subsequent return required to be filed the original of the letter authorizing the credit. Where the final return filed by a taxpayer shows that the amount of tax paid for the tax year exceeds the actual tax for such year, the Commissioner will make the appropriate refund, provided, however, that where the Commissioner has reason to believe that the final return is incorrect, he will withhold the refund in whole or in part. The making of a refund shall not prevent the Commissioner from making a determination that additional tax is due or from pursuing any other method to recover the full amount of the actual tax due for the tax year. The Commissioner of Finance reserves the right to audit the books and records of the person claiming a refund, prior to the making of any refund, or he may grant the refund or credit subject to such audit. The granting of a refund or a credit before an audit is without prejudice to the right of the Commissioner to determine after audit the applicant's right to refund or credit and his liability for the tax. The Commissioner of Finance will deny any application for refund or credit where he determines that the statutory requirements have not been met or that the grounds set forth in the application are without merit. No special form of application for the filing of a claim for refund or credit has been prescribed by the Commissioner of Finance. However, an application for refund or credit must be in writing and signed by the applicant or his duly authorized agent. If the application is signed by an agent, it must be accompanied by a power of attorney from his principal in a form acceptable to the Commissioner. The application must set forth the grounds upon which the claim for refund or credit is made. It must be accompanied by a cancelled check or other evidence of payment of the tax by the applicant to the Commissioner, or where payment of the tax was made by check and the check is not available, a photostatic copy thereof showing both the front and back of the check will be accepted in lieu thereof. The Commissioner may require such other additional information as he deems necessary in order to pass upon the application for refund. An application for a refund or credit made as herein provided shall be deemed an application for a revision of any tax, penalty or interest complained of and the Commissioner may receive evidence with respect thereto. After making his determination, the Commissioner will give notice thereof to the applicant who shall be entitled to review such determination by a proceeding pursuant to Article 78 of the Civil Practice Law and Rules, provided such proceeding is instituted within ninety days after the giving of the notice of such determination, and provided that a final determination of the tax due was not previously made. Such a proceeding shall not be instituted unless an undertaking if filed with the Commissioner in such amount and with such sureties as a Justice of the Supreme Court shall approve to the effect that if such proceeding be dismissed or the determination confirmed, the petitioner will pay all costs and charges which may accrue in the prosecution of such proceeding. A person shall not be entitled to a revision, refund or credit of a tax, interest or penalty which had been determined to be due where he has had a hearing or an opportunity for a hearing, as provided by the law, or has failed to avail himself of the remedies provided by the law. No refund or credit will be made of a tax, charge, interest or penalty paid after a determination by the Commissioner pursuant to the law unless it be found that such determination was erroneous, illegal or unconstitutional or otherwise improper, by the Commissioner after a hearing or on his own motion, or in a proceeding under Article 78 of the Civil Practice Law and Rules, in which event refund or credit without interest will be made of the tax, interest or penalty found to have been overpaid.

19 RCNY § 7-14 Proceedings To Recover Tax.

§ 7-14 Proceedings To Recover Tax. (a) Whenever any person shall fail to pay any tax or penalty or interest imposed by the law as therein provided the Corporation Counsel shall, upon the request of the Commissioner of Finance, bring or cause to be brought an action to enforce payment of the same against the person liable for the same on behalf of the City of New York in any court of the State of New York or of any other state or of the United States. If, however, the Commissioner of Finance in his discretion believes that a taxpayer subject to the law is about to cease business, leave the state, or remove or dissipate the assets out of which tax or penalties might be satisfied, and that any such tax or penalty will not be paid when due, he may declare such tax or penalty to be immediately due and payable and may issue a warrant immediately. (b) As an additional or alternate remedy, the Commissioner of Finance may issue a warrant, directed to the City Sheriff commanding him to levy upon and sell the real and personal property of such person which may be found within the City, for the payment of the amount thereof, with any penalties and interest and the cost of executing the warrant, and to return such warrant to the Commissioner of Finance and to pay to him the money collected by virtue thereof within sixty days after the receipt of such warrant. The City Sheriff shall, within five days after the receipt of the warrant, file with the County Clerk a copy thereof, and thereupon such clerk shall enter in the judgment docket the name of the person mentioned in the warrant and the amount of the tax, penalties and interest for which the warrant is issued and the date when such copy is filed. Thereupon the amount of such warrant so docketed shall become a lien upon the title to and interest in real and personal property of the person against whom the warrant is issued. The City Sheriff shall then proceed upon the warrant in the same manner and with like effect as that provided by law in respect to executions issued against property upon judgment of a court of record, and for services in executing the warrant he shall be entitled to the same fees which he may collect in the same manner. In the discretion of the Commissioner of Finance a warrant of like terms, force and effect may be issued and directed to any officer or employee of the Department of Finance, and in the execution thereof such officer or employee shall have all the powers conferred by law upon sheriffs, but he shall be entitled to no fee or compensation in excess of the actual expenses paid in the performance of such duty. If a warrant is returned not satisfied in full, the Commissioner of Finance may from time-to-time issue new warrants and shall also have the same remedies to enforce the amount due thereunder as if the City had recovered judgment therefor and execution thereon had been returned unsatisfied.

19 RCNY § 7-15 Bulk Sales.

§ 7-15 Bulk Sales. Whenever there is made a sale, transfer or assignment in bulk of any part of the whole of a stock of merchandise or of fixtures, or merchandise and of fixtures pertaining to the conducting of the business of the seller, transferrer or assignor, otherwise than in the ordinary course of trade and in the regular prosecution of said business, the purchaser, transferee or assignee shall at least ten days before taking possession of such merchandise, fixtures, or merchandise and fixtures, or paying therefore, notify the Commissioner of Finance by registered mail of the proposed sale and of the price, terms and conditions thereof whether or not the seller, transferrer or assignor, has represented to, or informed the purchaser, transferee or assignee that it owes any tax pursuant to the law and whether or not the purchaser, transferee or assignee has knowledge that such taxes are owing and whether any such taxes are in fact owing. Whenever the purchaser, transferee or assignee shall fail to give notice to the Commissioner of Finance as required by the preceding paragraph, or whenever the Commissioner of Finance shall inform the purchaser, transferee or assignee that a possible claim for such tax or taxes exists, any sums of money, property or choses in action, or other consideration, which the purchaser, transferee or assignee is required to transfer over to the seller, transferrer or assignor shall be subject to a first priority right and lien for any such taxes theretofore or thereafter determined to be due from the seller, transferrer or assignor to the City, and the purchaser, transferee, or assignee is forbidden to transfer to the seller, transferrer or assignor any such sums of money, property or choses in action to the extent of the amount of the City's claim. For failure to comply with the provisions hereof, the purchaser, transferee or assignee, in addition to being subject to the liabilities and remedies imposed under the provisions of Article 6 of the Uniform Commercial Code, shall be personally liable for the payment to the City of any such taxes theretofore or thereafter determined to be due to the City from the seller, transferrer or assignor, and such liability may be assessed and enforced in the same manner as the liability for tax under the law.

19 RCNY § 7-16 General Powers of the Commissioner of Finance.

§ 7-16 General Powers of the Commissioner of Finance. In addition to the powers granted to the Commissioner of Finance by the law, he is also authorized and empowered: (a) To make, adopt and amend rules and regulations appropriate to the carrying out of the law and the purposes thereof; (b) To extend, for cause shown, the time for filing any return for a period not exceeding ninety days; and to compromise disputed claims in connection with the taxes hereby imposed; (c) To request information from the Tax Commissioner of the State of New York or the Treasury Department of the United States relative to any person; and to afford information to such Tax Commissioner or such Treasury Department relative to any person; (d) To delegate his functions hereunder to a Deputy Commissioner of Finance or other employee or employees of his department; (e) To assess, determine, revise and adjust the taxes imposed under the law; (f) To require any tenant who uses premises for both residential purposes and as taxable premises and who pays an undivided rent for the entire premises so used to provide him with a signed and notarized request to the United States Director of Internal Revenue for photostatic copies of the tenant's income tax return for any year when he deems such income tax return necessary to determine the rent ascribable to so much of such premises as is used as taxable premises; and, if the tenant refuses to provide him with such a signed written request, to treat the rent for the entire premises as the rent for so much as is used as taxable premises; (g) To prescribe methods for determining how much of any tenant's base rent is ascribable to a use which results in a reduction of the base rent or for determining any other division of rent or of use of premises necessary for the determination of the base rent or the amount of the base rent subject to tax under the law.

19 RCNY § 7-17 Penalties and Interest.

§ 7-17 Penalties and Interest. (a) Interest on underpayments. If any amount of tax is not paid on or before the last day prescribed for payment (without regard to any extension of time granted for payment), interest on such amount at the rate and for the periods prescribed by the law and the regulations of the Commissioner of Finance shall be paid. In computing the mount of interest to be paid with respect to taxes which remain or become due on or after July 16, 1985, such interest shall be compounded daily. No interest shall be paid if the amount thereof is less than one dollar. (b) Civil penalties. Any person failing to file a return or to pay any tax due prior to February 24, 1983 within the time required by law shall be subject to a penalty of five percent of the amount due. If the Commissioner of Finance is satisfied that the delay was excusable he may remit all or any part or such penalty. With respect to returns or payments which become due on or after February 24, 1983, the following penalties apply: (1) Failure to file return. (i) In case of failure to file a return on or before the prescribed date (determined with regard to any extension of time for filing), unless it is shown that such failure is due to reasonable cause (see paragraph 5 of this subdivision) and not due to willful neglect, there is to be added to the amount required to be shown as tax on such return five percent (5%) of the amount of such tax for each month or fraction thereof during which such failure continues, not exceeding twenty-five percent (25%) in the aggregate. In addition thereto, for tax years beginning on or after June 1, 1984, where a tenant fails to file a final return for taxable premises with respect to which the tenant is exempt from the tax by reason of 19 RCNY § 7-04(f)(2), there shall be imposed a penalty of $50 for each $1,000 of base rent, or fraction thereof, attributable to such taxable premises. (ii) With respect to returns required to be filed on or after July 16, 1985, in the case of a failure to file a tax return within 60 days of the date prescribed for filing of such return (determined with regard to any extension of time for filing), unless it is shown that such failure is due to reasonable cause and not due to willful neglect, the addition to tax under subparagraph (i) of this paragraph shall not be less than the lesser of one hundred dollars ($100) or one hundred percent (100%) of the amount required to be shown as tax on such return. (iii) For purposes of subparagraphs (i) and (ii) the amount of the tax required to be shown on the return shall be reduced by the amount of any part of the tax which is paid on or before the date prescribed for payment of the tax and by the amount of any credit against the tax which may be claimed on the return. (2) Failure to pay tax shown on final return. In case of failure to pay the amount shown as tax on a final return to be filed on or before the prescribed date (determined with regard to any extension of time for payment), unless it is shown that such failure is due to reasonable cause (see paragraph (5) of this subdivision) and not due to willful neglect, there shall be added to the amount shown as tax on such return one-half of one percent (1/2%) of the amount of such tax for each month or fraction thereof during which such failure continues, not exceeding twenty-five percent (25%) in the aggregate. For the purpose of computing the addition for any month the amount of tax shown on the return shall be reduced by the amount of any part of the tax which is paid on or before the beginning of such month and by the amount of any credit against the tax which may be claimed on the return. If the amount of tax required to be shown on a return is less than the amount shown as tax on such return, this paragraph shall be applied by substituting such lower amount. (3) Failure to pay tax required to be shown on final return. In case of failure to pay any amount in respect of any tax required to be shown on a final return required to be filed which is not so shown (including a determination made pursuant to 19 RCNY § 7-12), within ten (10) days of the date of the notice and demand, unless it is shown that such failure is due to reasonable cause (see paragraph (5) of this subdivision) and not due to willful neglect, there shall be added to the amount of tax stated in such notice and demand one-half of one percent (1/2%) of such tax for each month or fraction thereof during which such failure continues, not exceeding twenty-five percent (25%) in the aggregate. For the purpose of computing the addition for any month, the amount of tax stated in the notice and demand shall be reduced by the amount of any part of the tax which is paid before the beginning of such month. (4) Limitations on additions. (i) With respect to any return the amount of the addition to tax is limited to the following: (A) At no time will the addition for one (1) month be more than five percent (5%). (B) If paragraphs (1) and (2) of this subdivision are both applicable, the addition under paragraph (1) is reduced by the addition under paragraph (2). Thus, the addition to the charge will be four and one-half percent (4 1/2%) under paragraph (1) and one-half of one percent (1/2%) under paragraph (2) for each month up to and including the first five (5) months. After the first five (5) months, the addition of one-half of one percent (1/2%) per month pursuant to paragraph (2) will apply for the next forty-five (45) months for a maximum aggregate of forty-seven and one-half percent (47 1/2%) addition to tax. However, in any case described in subparagraph (b) of paragraph (1) of this subdivision (relating to returns filed after 60 days of the due date) the amount of the addition to tax under such paragraph (1) shall not be reduced below the amount provided in such subparagraph (i.e., the lesser of $100 or 100% of tax due). (C) If paragraphs (1) and (3) of this subdivision are both applicable the maximum amount of the addition to tax may not exceed twenty-five percent (25%) in the aggregate. The maximum amount of the addition to tax pursuant to paragraph (3) of this subdivision shall be reduced by the amount of the addition to tax pursuant to paragraph (1) of this subdivision (determined without regard to subparagraph (i) of such paragraph (1)) which is attributable to the tax for which the notice and demand is made and which is not paid within ten (10) days of such notice and demand. (ii) The provisions of this paragraph may be illustrated by the following examples: Example 1: Assume the taxpayer filed his tax return for the year June 1, 1982 to May 31, 1983 (due June 20, 1983) on September 25, 1983, and the failure to file on or before the prescribed date is not due to reasonable cause. The tax shown on the return is $800 and deficiency of $200 is subsequently assessed, making the tax required to be shown on the return, $1,000. Of this amount, $700 has been paid on quarterly returns. The balance due, as shown on the return, of $100 ($800 shown as tax return less $700 previously paid) is paid on October 26, 1983. The failure to pay on or before the prescribed date is not due to reasonable cause. There will be imposed, in addition to interest, an additional amount under paragraph (2), of $2.50, which is 2.5 percent (2% for the 4 months from June 21 through October 20, and 0.5% for the fractional part of the month from October 21 through October 26) of the net amount shown due on the return of $100. There will also be imposed an additional amount under paragraph (1) of $58, determined as follows: 20 percent (5% per month for the 3 months from June 21 through September 20 and 5% for the fractional part of the month from September 20 through September 25) of the amount due of $300 ($1,000 required to be shown on the return less $700 paid previously) $60 Reduced by the amount of the addition imposed under paragraph (2) for those months $2 Addition to tax under paragraph (1) $58 Example 2: A notice and demand for the $200 deficiency is issued on January 8, 1984, but the taxpayer does not pay the deficiency until December 23, 1984. In addition to interest there will be imposed an additional amount under paragraph (3) of $10, determined as follows: Addition computed without regard to limitation: 6 percent (5 1/2% for the 11 months from January 19, 1984 through December 18, 1984, and 0.5% of the fractional part of the month from December 19 through December 23) of the amount stated in the notice and demand ($200) $12 Limitation on addition: 25 percent of the amount stated in the notice and demand ($200) $50 Reduced by the part of the addition under paragraph (1) for failure to file attributable to the $200 deficiency (20% of $200) $40 Maximum amount of the addition under paragraph (3) $10 Example 3: A taxpayer files his tax return for the year June 1, 1982 to May 31, 1983, on February 2, 1984, and such delinquency is not due to reasonable cause. The balance due, as shown on the return, of $500 is paid when the return is filed on February 2, 1984. In addition to interest and the addition for failure to pay under paragraph (2) of the $20 (8 months at 0.5% per month, 4%), there will also be imposed an additional amount under paragraph (1) of $112.50, determined as follows: Penalty at 5 percent for maximum of 5 months, 25 percent of $500 $125.00 Less reduction for the amount of the addition under paragraph (2): Amount imposed under paragraph (2) for failure to pay for the months in which there is also an addition for failure to file – 2 1/2% for the 5 months June 21 through November 20 of the net amount due ($500) $12.50 Additional to tax under paragraph (1) $112.50 (5) Reasonable cause as used in paragraphs (1), (2) and (3) must be affirmatively shown in a written statement. The taxpayer's previous compliance record may be taken into account. Grounds for reasonable cause, where clearly established, may include the following: (i) death or serious illness of the responsible officer or employee of the taxpayer, or his unavoidable absence from his usual place of business; (ii) destruction of the taxpayer's place of business or business records by fire or other casualty; (iii) inability to obtain and assemble essential information required for the preparation of a complete return despite reasonable efforts; (iv) any other cause for delinquency which appears to a person of ordinary prudence and intelligence as a reasonable cause for delay in filing a return and which clearly indicates an absence of gross negligence or willful intent to disobey the taxing statutes. Past performance should be taken into account. Ignorance of the law, however, will not be considered reasonable cause. (6) Underpayment due to negligence. (i) If any part of an underpayment is due to negligence or intentional disregard of the law, or rules or regulations thereunder (but without intent to defraud), there shall be added to the tax a penalty in an amount equal to five percent (5%) of the underpayment. (ii) With respect to taxes required to be paid on or after July 16, 1985, there shall be added to the tax (in addition to the penalty determined under subparagraph (i) of this paragraph) an amount equal to fifty percent (50%) of the interest payable under subdivision (a) of this section with respect to the portion of the underpayment described in such subparagraph (i) which is attributable to the negligence or intentional disregard referred to in such subparagraph (i), for the period beginning on the last date prescribed by law for payment of such underpayment (determined without regard to any extension) and ending on the date of the assessment of the tax (or, if earlier, the date of the payment of the tax). (7) Underpayment due to fraud. (i) If any part of an underpayment is due to fraud, there shall be added to the tax a penalty in an amount equal to fifty percent (50%) of the underpayment. (ii) With respect to taxes required to be paid on or after July 16, 1985, there shall be added to the tax (in addition to the penalty determined under subparagraph (i) of this paragraph) an amount equal to fifty percent (50%) of the interest payable under subdivision (a) of this section with respect to the portion of the underpayment described in such subparagraph (i) which is attributable to fraud, for the period beginning on the last day prescribed by law for payment of such underpayment (determined without regard to any extension) and ending on the date of the assessment of the tax (or, if earlier, the date of the payment of the tax). (iii) The penalty under this paragraph (7) shall be in lieu of the maximum twenty-five percent (25%) penalty due to willful neglect for failure to file a return, five percent (5%) penalty due to negligence and the additional one half of one percent (1/2%) per month penalty pursuant to paragraphs (2) and (3) or this subdivision. (8) Any person who fails to pay tax, or to make, render, sign or certify any return, or to supply any information within the required time, with fraudulent intent, shall be liable for a penalty of not more than one thousand dollars ($1,000), in addition to any other amounts required under the law to be imposed, assessed and collected by the Commissioner of Finance. The Commissioner of Finance has the power, in his discretion, to waive, reduce or compromise any penalty under this paragraph. (9) The additions to tax and penalties provided by this subdivision shall be paid and enforced in the same manner as taxes. (10) Whenever a penalty is assessed for failure to pay the tax when due, an application for the remission thereof may be made to the Commissioner of Finance. Such application must be made by the person against whom the penalty is assessed, and must set forth the grounds upon which the remission is requested. (11) Substantial understatement of liability. With respect to returns required to be filed on or after July 16, 1985, if there is a substantial understatement of tax for any taxable year, there shall be added to the tax an amount equal to ten percent (10%) of the amount of any underpayment attributable to such understatement. For purposes of this subdivision, there is a substantial understatement of tax for any taxable year if the amount of the understatement for the taxable year exceeds the greater of ten percent of the tax required to be shown on the return for the taxable year, or $5,000. For purposes of the preceding sentence, the term "understatement" means the excess of the amount of the tax required to be shown on the final return for the tax year, over the amount of the tax imposed which is shown on the return, reduced by any rebate. The amount of such understatement shall be reduced by that portion of the understatement which is attributable to the tax treatment of any item by the taxpayer if there is or was substantial authority for such treatment, or any item with respect to which the relevant facts affecting the item's tax treatment are adequately disclosed in the return or in a statement attached to the return. The Commissioner of Finance may waive all or any part of the addition to tax provided by this subdivision on a showing by the taxpayer that there was reasonable cause for the understatement (or part thereof) and that the taxpayer acted in good faith. (12) Aiding or assisting in the giving of fraudulent returns, reports, statements or other documents. (i) With respect to returns required to be filed on or after July 16, 1985, any person who, with the intent that tax be evaded, shall for a fee or other compensation or as an incident to the performance of other services for which such person receives compensation, aid or assist in, or procure, counsel, or advise the preparation or presentation under, or in connection with any matter arising under the law of any return, report, statement or other document which is fraudulent or false as to any material matter, or supply any false or fraudulent information, whether or not such falsity or fraud is with the knowledge or consent of the person authorized or required to present such return, report, statement or other document shall pay a penalty not exceeding ten thousand dollars. (ii) For purposes of subparagraph (i) of this paragraph, the term "procures" includes ordering (or otherwise causing) a subordinate to do an act, and knowing of, and not attempting to prevent, participation by a subordinate in an act. The term "subordinate" means any other person (whether or not a member, employee, or agent of the taxpayer involved) over whose activities the person has direction, supervision, or control. (iii) For purposes of subparagraph (i) of this paragraph, a person furnishing typing, reproducing, or other mechanical assistance with respect to a document shall not be treated as having aided or assisted in the preparation of such document by reason of such assistance. (iv) The penalty imposed by this paragraph shall be in addition to any other penalty provided by law. (c) Criminal penalties. (1) Failure to obey subpoena; false testimony. (i) Any person who, being duly subpoenaed in connection with a matter arising under the law, to attend as a witness or to produce books, accounts, records, memoranda, documents or other papers, (A) fails or refuses to attend without lawful excuse; (B) refuses to be sworn; (C) refuses to answer any material and proper question; or (D) refuses, after reasonable notice, to produce books, papers and documents in his possession or under his control which constitute material and proper evidence shall be guilty of a misdemeanor. (ii) Any person who shall testify falsely in any material matter pending before the Commissioner of Finance shall be guilty of and punishable for perjury. (2) Willful failure to file a return or report or pay the tax. Any person required to pay any tax or make any return or report, who willfully fails to pay such tax or make such return or report, at the time or times so required, shall be guilty of a misdemeanor. (3) Fraudulent returns, reports, statements or other documents. (i) Any person who willfully makes and subscribes any return, report, statement or other document which is required to be filed with or furnished to the Commissioner of Finance or to any person, pursuant to the provisions of the law, which he does not believe to be true and correct as to every material matter shall be guilty of a misdemeanor. (ii) Any person who willfully delivers or discloses to the Commissioner of Finance or to any person, pursuant to the provisions of the law, any list, return, report, account, statement or other document known by him to be fraudulent or to be false as to any material matter shall be guilty of a misdemeanor. (iii) For purposes of this paragraph, the omission by any person of any material matter with intent to deceive shall constitute the delivery or disclosure of a document known by him to be fraudulent or to be false as to any material matter. (4) Failure to keep records. Any person who willfully fails to keep or retain any records required to be kept or retained by the law shall be guilty of a misdemeanor. (d) Commissioner's certificate. The certificate of the Commissioner of Finance to the effect that a tax has not been paid, that a return has not been filed, or that information has not been supplied pursuant to the provisions of the law shall be prima facie evidence thereof.

19 RCNY § 7-18 Returns To Be Secret.

§ 7-18 Returns To Be Secret. Except in accordance with judicial order or as otherwise provided by law, it is unlawful for the Commissioner of Finance or any officer or employee of the Department of Finance to divulge or make known in any manner any information relating to the business of a taxpayer contained in any return required under the law. The officers charged with the custody of such returns are not required to produce any of them or evidence of anything contained in them in any action or proceeding in any court, except on behalf of the Commissioner of Finance in an action or proceeding under the provisions of the law, or on behalf of any party to any action or proceeding under the provisions of the law when the returns or facts shown thereby are directly involved in such action or proceeding, in either of which events the court may require the production of and may admit in evidence so much of the returns or of the facts shown thereby as are pertinent to the action or proceeding and no more. A taxpayer may obtain a certified copy of any return filed in connection with his tax upon application in writing to the Commissioner. Where a representative of a taxpayer applies for a certified copy of such return, he must file a power of attorney with the application. A certified copy of a taxpayer's return or of information contained therein or relating thereto may be delivered to the United States of America or any department thereof, the State of New York or any department thereof, any agency or any department of the City of New York provided the same is requested for official business. The Corporation Counsel or other legal representatives of the City or the District Attorney of any county within the City may be permitted to inspect returns for official business. Nothing herein shall be construed to prohibit the publication of statistics so classified as to prevent the identification of particular returns or items thereof.

19 RCNY § 7-19 Notices.

§ 7-19 Notices. A notice authorized or required by the law may be given to the person for whom it is intended by mailing it in a postpaid envelope addressed to such person at the address given in the last return filed by him pursuant to the law or in any application made by him, or, if no return has been filed or application made, then to such address as may be obtainable. The mailing of a notice as provided herein shall be presumptive evidence of the receipt of the same by the person to whom addressed. Any period of time which is determined according to the provisions of the law by the giving of notice shall commence to run from the date of mailing of such notice as provided herein.

19 RCNY § 7-20 Statute of Limitations.

§ 7-20 Statute of Limitations. The provisions of the Civil Practice Law and Rules or any other law relative to limitations of time for the enforcement of a civil remedy shall not apply to any proceeding or action taken by the City to levy, appraise, assess, determine or enforce the collection of any tax or penalty provided by the law. However, except in the case of a willfully false or fraudulent return with intent to evade the tax, no assessment of additional tax shall be amended after the expiration of more than three years from the date of filing the final return for the tax year to which the assessment relates; provided, however, that where no return has been made as provided by law, the tax may be assessed at any time. Where, before the expiration of the period prescribed for the assessment of an additional tax, a person has consented in writing that such period be extended, the amount of such additional tax due may be determined at any time within such extended period. The period so extended may be further extended by subsequent consent in writing before the expiration of the extended period.
Source: City of New York, Charter, Administrative Code and Rules (American Legal Publishing XML export, codelibrary.amlegal.com)URL: https://codelibrary.amlegal.com/codes/newyorkcity/latest/NYCrules/0-0-0-36125Fetched: 10/24/2026

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