Allocation

RCNY tit. 19, ch. 11, subch. D

in effect

19 RCNY § 11-61 General Rules for Allocation.

§ 11-61 General Rules for Allocation. (a) Title 11, Chapter 6, Subchapter 2 of the Administrative Code provides for separate allocations of business income and capital, investment income and capital, and subsidiary capital. Business income and capital generally are allocated by a business allocation percentage determined by three factors: tangible property, business receipts and payrolls (19 RCNY §§ 11-63 through 11-67, infra). Investment income and capital are allocated by an investment allocation percentage determined pursuant to 19 RCNY §§ 11-68 through 11-71 of these regulations. Subsidiary capital is allocated by a subsidiary allocation percentage determined by the amount of capital employed in New York City by the taxpayer's subsidiaries (19 RCNY § 11-71, infra). (b) Every corporation is entitled to an allocation, within and without New York City, of its subsidiary capital and its investment capital and income, even if it transacts all of its business and maintains its only office in New York City. A corporation is entitled to allocate part of its business income and capital outside New York City only if it has a regular place of business outside the City; otherwise 100 percent of its business income and capital must be allocated to New York City.

19 RCNY § 11-62 Allocation on Combined Reports.

§ 11-62 Allocation on Combined Reports. In the case of combined reports, allocation is made on the basis of combined accounts from which intercompany items (including intercorporate receipts) are eliminated. The elections provided for in § 11-604(6) of the Administrative Code (19 RCNY §§ 11-63(a), 11-68(a) and 11-70(a), infra) are not available to corporations taxed on a combined basis.

19 RCNY § 11-63 Business Allocation Percentage.

§ 11-63 Business Allocation Percentage. (§ 11-604(3)(a), Administrative Code.) (a) Use of business allocation percentage. (§ 11-604(3)(a).) (1) There are many taxpayers which need to determine only a business allocation percentage, and need not be concerned with a subsidiary allocation percentage or an investment allocation percentage. Thus, a taxpayer which has only business income and capital allocates its entire net income and capital by the business allocation percentage. (2) If the business income (before allowance of any net operating loss deduction) of a taxpayer, not reporting on a combined basis, is more than 75 percent of its entire net income (before allowance of any net operating loss deduction) and its business capital is more than 75 per cent of its total business and investment capital, it may elect to allocate its entire net income and total business and investment capital by the business allocation percentage. (3) In other cases, a taxpayer which has both business and investment capital, but has only business income or has business income and an investment loss, allocates its entire net income and its business capital by the business allocation percentage. Its investment capital is allocated by the investment allocation percentage (19 RCNY § 11-68(a) and (b), infra). (b) Regular place of business. (1) If the taxpayer did not have a regular place of business outside New York City during the period covered by the report, its business allocation percentage is 100 percent; in other words, the taxpayer may not allocate any of its business income or capital outside New York City. (2) A regular place of business is any bona fide office (other than a statutory office), factory, warehouse, or other space which is regularly used by the taxpayer in carrying on its business. Where as a regular course of business, property of the taxpayer is stored by it in a public warehouse until it is shipped to customers, such warehouse is considered a regular place of business of the taxpayer and, where as a regular course of business, raw material or partially finished goods of a taxpayer are delivered to an independent contractor to be converted, processed, finished or improved, and the finished goods remain in the possession of the independent contractor until shipped to customers, the plant of such independent contractor is considered a regular place of business of the taxpayer. Where as a regular course of business a taxpayer, engaged in trucking operations, uses a terminal, garage, repair shop or any similar space under an agreement whereby it contributes to the cost of maintaining such facilities or furnishes similar facilities of its own in exchange therefor, such space is considered a regular place of business of the taxpayer. (3) A taxpayer does not have regular place of business outside the City solely by consigning goods to an independent factor outside the City for sale at the consignee's discretion. (c) Completion of business allocation percentage. (1) If the taxpayer had a regular place of business outside New York City during the period covered by the report, its business allocation percentage is generally computed on the basis of its (i) real and tangible personal property (including real property rented to it) within and without New York City (19 RCNY § 11-64, infra). (ii) business receipts within and without New York City (19 RCNY § 11-65(a), infra), and (iii) payrolls within and without New York City (19 RCNY § 11-66(a), infra). (2) (i) The business allocation percentage is computed by adding together the percentages of the taxpayer's real and tangible personal property, business receipts and payrolls within New York City during the period covered by the report, and dividing the total of such percentages by three. However, if one of the factors (property, receipts or payrolls) is missing, the other two percentages are added and the sum is divided by two, and if two of the factors are missing, the remaining percentage is the business allocation percentage. (A factor is not missing merely because its numerator is zero, but it is missing if both its numerator and its denominator are zero.) Example: A taxpayer owns no real or tangible personal property and rents no real property either within or without the City. The property factor being missing, the business allocation percentage may be computed by adding the percentages derived from the allocation of its receipts and payrolls, and dividing the total by two. (ii) In the event that any of the percentages to be determined under subparagraphs (i), (iii) or (iii) of paragraph (1) of this subdivision cannot be determined because the taxpayer has either no property, no payroll or no business receipts within or without the City, then the computation to be made under subparagraph 10 of paragraph (a) of subdivision (3) of § 11-604 of the Administrative Code (applicable to taxable years beginning in 2009 and thereafter but before 2018) shall be made by taking the sum of the products that are determined under such subparagraph (10) for the factors that are present, and dividing that sum by the sum of the weight factors that apply to each of the present factors in the calculation made under such subparagraph (10). This amount is then rounded to four decimal places. (An allocation factor is not missing merely because its numerator is zero, but it is missing if both its numerator and its denominator are zero.) (iii) Weight factor defined. For purposes of subparagraph (ii) of this paragraph, "weight factor" is the percentage used in the allocation computation in subparagraph 10 of paragraph (a) of subdivision (3) of § 11-604 of the Administrative Code, by which the percentage derived from paragraph (1) of this subdivision is multiplied in such allocation computation. For example, in subclause (i) of clause (A) of subparagraph (10) of paragraph (a) of subdivision (3) of § 11-604 of the Administrative Code, the weight factor is 30%; in subclause (i) of clause (I) of subparagraph (10) of paragraph (a) of subdivision (3) of § 11-604 of the Administrative Code, the weight factor is 3 1/2%. (iv) Example: For the tax year 2009, a taxpayer has no employees either within or without the City. The property factor percentage determined under (c)(1)(i) of this section is 10%, and the business receipts factor percentage determined under (c)(1)(ii) of this section is 25%. As the payroll factor is missing, the allocation percentage may be computed by taking the sum of (A) the product of 30% and 10%, and (B) the product of 40% and 25%, which is .03 + .1 = .13, then dividing that sum by the sum of the weight factors for property and business receipts, which are .30 and .40, respectively: .13 .30 +.40 = .13 .70 = .18571, rounded to four decimal places = .1857 (3) If it appears that the business allocation percentage computed on the basis of all or any of the property-receipts-payroll factors does not properly reflect the activity, business, capital or income of the taxpayer in New York City, the Commissioner of Finance may adjust the business allocation percentage, as set forth in 19 RCNY § 11-67, infra. (4) Double-weighted receipts factor for manufacturing businesses. (i) For taxable years beginning on or after July 1, 1996, a corporation that is a manufacturing corporation as defined in subparagraph (ii) may elect to determine its business allocation percentage by adding together the percentages determined under 19 RCNY §§ 11-64 and 11-66 and adding to that sum two times the percentage determined in 19 RCNY § 11-65 and dividing the total by the number of percentages. See paragraph (2) of this subdivision (c) for the determination of the business allocation percentage where one or more factors is missing. (ii) Manufacturing corporation. For purposes of this paragraph, a manufacturing corporation is defined as a corporation engaged primarily in the manufacturing and sale of tangible personal property. (A) (1) Manufacturing. Manufacturing means the process, including assembly, of working raw materials into wares suitable for use or that, by the use of machinery, tools, appliances and other similar equipment, gives new shapes, qualities or new combinations to matter that already has gone through some artificial process. (2) To qualify as manufacturing, a process, including assembly, must result in a significant change in the raw materials or component parts such that the end product of the process is substantially different in nature or form from the raw materials or component parts. (3) Manufacturing includes finishing partially finished goods only if the partially finished goods are not usable for their intended purpose in their unfinished state and does not include the mere packaging or labeling of goods. (4) Manufacturing includes printing in circumstances under which the taxpayer receives any combination of graphic or textual content from a customer, the taxpayer produces a tangible representation of that content, whether in print or other tangible form, through a series of processes using raw materials owned by the taxpayer and the taxpayer delivers that tangible product to the customer or one or more designees of the customer. Manufacturing also includes printing in circumstances under which the taxpayer uses any combination of graphic or textual content prepared by its own employees to produce a tangible representation of the content in print or other tangible form using raw materials owned by the taxpayer and the taxpayer delivers that tangible product to its customers or subscribers. (5) Manufacturing does not include furnishing information services subject to the tax imposed by § 1105(c)(1) of the tax law regardless of whether the information is provided in tangible form. (6) Manufacturing includes the design and development of pre-written computer software as defined in § 1101(b)(14) of the tax law to the extent that such pre-written computer software constitutes tangible personal property under § 1101(b)(6) of the tax law. (7) A corporation that performs services for a customer, including manufacturing services, on property or raw materials belonging to the customer will not be considered a manufacturing corporation. (8) A business that engages in pre-production activities, but not in the creation of the final product, will be considered to be engaged in manufacturing only if the pre-production activities are extensive and constitute an integral part of the manufacturing process. (B) To qualify as a manufacturing corporation, a corporation must be engaged in both the manufacture of tangible personal property and the sale of such property that it manufactures. Therefore, a corporation that manufactures tangible personal property but does not engage in the sale of such tangible personal property will not be considered a manufacturing corporation. Similarly, a corporation that sells tangible personal property but does not engage in the manufacture of tangible personal property will not be considered a manufacturing corporation. For purposes of this paragraph, the lease of tangible personal property will be considered a sale of tangible personal property. (C) For purposes of this paragraph, a corporation engaged in the manufacture and sale of tangible personal property will be considered to be primarily engaged in that activity if more than 50 percent of its gross receipts for the taxable year are derived from the sale of tangible personal property manufactured by the taxpayer. (1) For purposes of this subparagraph (ii)(C), gross receipts include only amounts treated as business receipts for purposes of 19 RCNY § 11-65 earned in the ordinary course of the taxpayer's trade or business. (2) For purposes of this subparagraph (ii)(C), gross receipts derived from the sale of tangible personal property shall mean the sale price of such tangible personal property valued in money, whether received in money or otherwise, without any deduction for expenses or early payment discounts, and including; (i) any amount for which credit is allowed to the purchaser, (ii) any charges to the purchaser for shipping or delivery regardless of whether such charges are separately stated in the written contract, if any, or on the bill rendered to such purchaser and regardless of whether such shipping or delivery is provided by the taxpayer or a third party, and (iii) any charges for services provided by the taxpayer relating to the sale of the tangible personal property provided that such services are subordinate to the sale of the tangible property and provided that such charges are not separately stated in a written contract or bill. (iii) If a group of corporations is permitted or required to file a combined report and the group, including all corporations in the group whether or not taxpayers, would qualify as a manufacturing corporation if it were a single corporation, excluding all intercompany transactions, the combined group may make an election under this paragraph. If a combined group would not qualify as a manufacturing corporation if it were a single corporation, neither the group nor any of its members may make the election under this paragraph even if one or more member corporations would qualify as manufacturing corporations if they were not included in the combined group. In order for the combined group to qualify as a manufacturing corporation it is not necessary that there be any individual member of the group that would qualify if it were not included in the combined group. See examples 7 and 8. (iv) An election to use the double-weighted receipts factor must be made on a timely filed original return (including extensions) for the taxable year. A separate election must be made for each taxable year. The election is irrevocable and cannot be made or revoked on an amended return except with the permission of the Commissioner upon such terms and as the Commissioner may specify where the Commissioner concludes that such permission should be granted in the interests of fairness due to changes in circumstances resulting from an audit adjustment. Except as otherwise provided in the preceding sentence, if a taxpayer fails to make an election to use the double-weighted receipts factor, its business allocation percentage must be determined under the provisions of paragraph (2) of this subdivision (c). (v) The provisions of this paragraph are illustrated by the following examples: Example 1: X Corporation is engaged in printing pamphlets, brochures, catalogues and business reports. Under an agreement with customer A, X Corporation receives graphic material and text from customer A that X uses to produce print plates, which are used to print multiple copies of a catalogue. X Corporation uses its own raw materials, including paper and ink, and its own equipment to produce the plates and the catalogue. X Corporation employees advise A with regard to the layout and typeface of the catalogue. In the course of performing the contract, X Corporation delivers a master print to A for its review and final approval. In addition, under the agreement with A, X Corporation prepares an electronic version of the catalogue for incorporation into a Web page maintained by A. X Corporation mails the print version of the catalogue to A's customers and delivers the electronic version of the catalogue to A on a disk. X Corporation receives $500x under the agreement with no breakdown of the price among the various services and products provided. Under an agreement with customer B, X Corporation receives the text of an annual financial statement required to be filed electronically with the SEC by B. B also requires print copies of the statement. X prints the report in hard copy, using its own ink and equipment but using paper belonging to the customer, delivers the hard copies to B and transmits the statement electronically to the SEC. X Corporation receives $200x under the agreement with B with no breakdown of the price among the various services and products provided. X Corporation's activities under the agreement with A are considered the manufacture and sale of tangible personal property. (Note: if X Corporation delivers the electronic version of the catalogue to A by means of the Internet the result would not change. The $500x received by X Corporation under the contract with A would be considered receipts from the manufacture and sale of tangible personal property provided that the provision of the electronic version is subordinate to the sale of the print version of the catalogue.) No part of X Corporation's activities under the agreement with B are considered the manufacture and sale of tangible personal property because under the agreement with B, X Corporation is merely performing services on property owned by B. (Note: if X Corporation used its own paper for the print copies, X Corporation's activities under the agreement with B would be considered the manufacture and sale of tangible personal property.) Of X Corporation's total business receipts of $700X, $500X are from the manufacture and sale of tangible personal property. Therefore, X Corporation is considered to be a manufacturing corporation. Example 2: Corporation X is engaged in compiling, printing and distributing a daily newspaper using material received from news services, its own reporters and editorial staff, its own paper and ink and printing equipment and its own technicians. Corporation X is considered engaged in manufacturing. Corporation X receives $100X in receipts from the sale of newspapers and $400X in receipts from the sale of advertising. Because less than 50 percent of Corporation X's receipts are from the manufacture and sale of tangible personal property, X is not considered a manufacturing corporation. Example 3: Corporation A is engaged in film processing whereby it receives undeveloped film from its customers and, using its own chemicals, paper and equipment, develops the film and makes print or slide copies for customers. Corporation A is engaged in manufacturing. If instead of using its own materials and equipment, Corporation A contracts with Corporation B to develop the film and make prints, Corporation A is not engaged in manufacturing. Example 4: Y Corporation contracts with A Corporation, an unrelated entity, to produce a line of art supplies, crayons, paper, markers, glue, etc. from raw materials purchased by Y. The finished goods are delivered to Y. Y packages two or more of those products together with paper purchased from another unrelated supplier into kits that Y sells to toy and art supply retailers. A Corporation's receipts under the contract with Y are not receipts from the manufacture and sale of tangible personal property because Y provides and owns the raw materials. Y's receipts from the sale of the kits are not receipts from the manufacture and sale of tangible personal property because Y does not manufacture the component parts itself and the packaged kits do not differ substantially in nature or form from the various component parts. Example 5: Corporation W washes, cuts, cooks, freezes and packages vegetables for wholesale and retail sale to customers. Corporation W is considered to be engaged in manufacturing. Example 6: Corporation M collects, sorts, shreds and compresses scrap metal into blocks that are convenient for handling, storage and shipping and sells the scrap metal blocks to companies that manufacture finished goods from them. Corporation M is considered to be engaged in manufacturing because the scrap metal sold differs substantially in nature from the components collected by M, which were not suitable for convenient handling, storage, shipping and sale in their original form. Example 7: Corporation C purchases fabric, cuts and sews clothing for sale to a wholesale distributor, Corporation E. Corporation C is engaged in the manufacture and sale of tangible personal property. Corporation E packages and labels the clothing for resale to its retail outlet customers. Corporation E is not considered to be engaged in manufacturing. If Corporation C cuts and sews fabric provided by Corporation D where Corporation D retains title to the fabric and D sells the finished clothing, neither Corporation C nor Corporation D would be considered to be engaged in the manufacture and sale of tangible personal property. Corporation C is providing manufacturing services and Corporation D is not conducting the manufacturing activities itself. Corporation C and Corporation D viewed as a single corporation would be considered to be engaged in manufacturing and sale of tangible personal property, and, if Corporation C and Corporation D are permitted or required to file a combined report and meet the other requirements of subparagraph (iii) of this paragraph, Corporation C and Corporation D may make the election under this paragraph. Example 8: Corporation X operates a chain of supermarkets. Corporation X sets up a subsidiary, Corporation S to produce, package and sell food products through Corporation X's markets and markets operated by third parties. Corporation X and Corporation S are required to file a combined return. Corporation S has receipts of $100X entirely from the manufacture and sale of tangible personal property. Corporation X has receipts of $900X from the supermarket business. The combined group may not make the election under this paragraph, because less than 50 percent of its total receipts are from the manufacture and sale of tangible personal property. Example 9: Corporation T purchases finished articles of clothing and using its own equipment and raw materials, imprints or embroiders its logo on each article. Corporation T sells the clothing under its own label. Corporation T is not considered engaged in manufacturing. While the presence of the logo on the clothing may increase its marketability, it does not substantially alter the nature or form of the clothing itself and the clothing is useable as such without the logo. Example 10: Corporation P purchases fabric from a mill and, using its own equipment, dyes, and other materials, puts a pattern on the fabric through a variety of processes and sells the fabric to clothing manufacturers. Corporation P is considered to be engaged in the manufacture and sale of tangible personal property because it substantially alters the nature of the material. Example 11: CS Corporation is exclusively engaged in the bottling and sale of soft drinks. CS maintains a factory where it mixes syrup then combines the syrup with carbonated water, places the mixture in bottles, labels the bottles and places them in cartons, then sells the cartons to retailers and wholesalers. CS is a manufacturing corporation. Example 12: X Corporation is engaged in the design, development and sale of computer software. X Corporation's employees use computers, programming languages and a library of "pre-written" functions and routines to develop software for use by financial institutions to manage accounts. X Corporation sells the same software to several customers although the software is enhanced or modified to meet the specific needs of each customer. Some customers receive the software on a disk, others receive it electronically over the Internet. More than 50% of X Corporation's gross receipts derive from both types of sales. The software is taxable as "pre-written computer software" under § 1101(b)(14) of the tax law. Sales of the software are treated as sales of tangible personal property for purposes of § 1101 of the tax law and, therefore, for purposes of subparagraph (ii)(C) of this paragraph. X Corporation is a manufacturing corporation. Example 13: X Corporation publishes and sells a magazine. X maintains a large staff of reporters, writers, editors, photographers, photo-editors, and graphic artists. This staff produces and assembles stories and photographs for the magazine using a variety of equipment including computers, photographic equipment, printers, scanners and file servers. Each week the staff culls through and edits a large number of stories and photographs and selects a number for inclusion in the magazine. The staff explores various layouts for the components of the magazine. As part of the process the layouts are examined in print form. The staff then finally produces a completed prototype of the magazine in electronic form. The prototype is delivered electronically to an unrelated printer who prints the magazine following X Corporation's detailed specifications, using raw materials including paper and ink supplied by X Corporation. The printer receives a fee for printing the magazine. The magazine is distributed by the printer to X's customers. X Corporation's extensive preprinting activities leading to the production of the final product are considered an integral part of the manufacturing process. As a result X is considered to be engaged in the manufacture and sale of tangible personal property. If more than 50% of X Corporation's receipts are from the subscription and newsstand sales of the magazine, X will be considered a manufacturing corporation. Example (14): X Corporation produces and sells apparel. X maintains a large staff including designers, graphic artists, pattern makers, computer operators, cutters, sewers and drapers. X's staff develops original ideas for garments, produces illustrations with the aid of computer systems, and selects certain of these ideas to be converted into finished samples. The creation of the samples involves selection of fabrics, cutting, sewing, testing of fabric quality and color and fitting the prototype garments. X then uses the computer systems to make style patterns, which it transfers electronically along with detailed instructions to third-party contractors to whom it also specifies or furnishes the fabrics and other raw materials used to produce the garments. The contractors, whose operations are overseen by X's employees, assemble the garments using the patterns and materials supplied by X. X then sells the garments to its wholesale customers. X's extensive pre-production activities are considered an integral part of the manufacturing process. As a result X is considered to be engaged in the manufacture and sale of tangible personal property. If more than 50% of X Corporation's receipts are from the sale of garments produced as described above, X will be considered a manufacturing corporation.

19 RCNY § 11-64 Property Factor.

§ 11-64 Property Factor. (a) Computation of property factor. (1) The percentage of the taxpayer's real and tangible personal property within New York City is determined by dividing the average fair market value of such property within New York City (without deduction of any encumbrances) by the average fair market value of all such property within and without New York City. Such property should be included only for the period covered by the report. In determining such percentage real property rented to the taxpayer as well as real and tangible property owned by it must be considered. (2) The average fair market value of real and tangible personal property owned by the taxpayer, both within and without New York City, is determined by the same method used to determine the amount of taxpayer's capital, in accordance with the provisions of 19 RCNY §§ 11-39 and 11-40, supra. The fair market value of real property rented to the taxpayer must be determined in accordance with the provisions of 19 RCNY § 11-64(b), infra. The same method of valuation must be used consistently with respect to property within and without the City. Any method of valuation adopted by the taxpayer on any report and accepted by the Commissioner of Finance my not be changed on any subsequent report except with the consent of the Commissioner. (3) Tangible personal property is within New York City if and so long as it is physically situated or located here, even though it may be stored in a bonded warehouse. Property of the taxpayer held in New York City by an agent, consignee or factor is (and property held outside New York City by an agent, consignee or factor is not) situated or located within New York City. Property, while in transit from a point outside New York City to a point in New York City or vice versa, does not have a fixed situs either within or without the City and, therefore, will not be deemed to be "situated" or "located" within or without New York City. Accordingly, such property while so in transit should be omitted from both the numerator and the denominator of the property factor. Property in transit from a point outside New York City to another point outside New York City is situated or located without New York City. Property in transit from a point in New York City to another point in New York City is situated or located in New York City. (4) Trucks and other rolling equipment used both within and without New York City may be allocated to New York City on the percentage that the mileage within New York City bears to the total mileage within and without New York City, or on the percentage that the time spent in New York City bears to the total time spent within and without New York City, or by any other method approved by the Commissioner of Finance. (5) The term tangible personal property means corporeal personal property, such as machinery, tools, implements, goods, wares and merchandise, and does not mean money, deposits in banks, shares of stock, bonds, notes, credits or evidences of an interest in property and evidences of debt (§ 11-602(10), Administrative Code). (b) Rented real property. (1) As heretofore noted, in determining the property factor, real property rented to the taxpayer, as well as real property and tangible personal property owned by it, must be considered. In order to avoid unnecessary hardship on taxpayers and for ease of administration, the fair market value of real property, both within and without New York City, which is rented to the taxpayer is determined by multiplying the gross rents payable during the period covered by the report by eight. (2) Gross rents as used in this subdivision, is the actual sum of money or other consideration payable, directly or indirectly, by the taxpayer or for its benefit for the use or possession of the property and includes: (i) Any amount payable for the use or possession of real property, or any part thereof, whether designated as a fixed sum of money or as a percentage of sales, profits, or otherwise. Example 1: A taxpayer, pursuant to the terms of a lease, pays the lessor $1,000 per month and at the end of the year pays the lessor one percent of its gross sales of $400,000. Its gross rent is $16,000. (ii) Any amount payable as additional rent or in lieu of rent, such as interest, taxes, insurance, repairs or any other amount required to be paid by the terms of a lease or other arrangement. Example 2: A taxpayer, pursuant to the terms of a lease, pays the lessor $24,000 per annum and also pays real estate taxes in the amount of $4,000 and interest on a mortgage in the amount of $2,000. Its gross rent is $30,000. (iii) A proportionate part of the cost of any improvement to real property made by or on behalf of the taxpayer which reverts to the owner or lessor upon termination of a lease or other arrangement, based on the unexpired term of the lease commencing with the date the improvement is completed (or the life of the improvement if its life expectancy is less than the unexpired term of the lease), provided, however, that where a building is erected on leased land by or on behalf of the taxpayer, the value of the land is determined by multiplying the gross rent by eight, and the value of the building is determined in the same manner as if owned by the taxpayer. (See 19 RCNY § 11-39, supra.) The proportionate part of the cost of an improvement (other than a building on leased land) is generally equal to the amount of the amortization allowed in computing entire net income, whether the lease does or does not contain an option of renewal. Example 3: A taxpayer enters into a 21-year lease of certain premises at a rental of $20,000 per annum and after the expiration of one year installs a new store front at a cost of $10,000 which reverts to the owner upon the expiration of the lease. Its gross rent for the first year is $20,000. However, for subsequent years its gross rent is $20,500 ($20,000 annual rent plus 1/20th of $10,000, the cost of the improvement apportioned on the basis of the unexpired term of the lease). Example 4: A taxpayer leases a parcel of vacant land for 40 years at an annual rental of $5,000 and erects thereon a building which costs $600,000. The value of the land is determined by multiplying the annual rent of $5,000 by eight, and the value of the building is determined in the same manner as if owned by the taxpayer. (3) Gross rents do not include: (i) Intercompany rents if both the lessor and lessee are taxed on a combined basis under Subchapter 2 of Chapter 6 of Title 11 of the Administrative Code. (ii) Amounts payable as separate charges for water and electric service furnished by the lessor. (iii) Amounts payable for storage provided no designated space under the control of the taxpayer as a tenant is rented for storage purposes. (iv) That portion of any rental payment, which, in the discretion of the Commissioner of Finance is applicable to property subleased by the taxpayer and not used by it. Example 5: A taxpayer leases certain premises, all of which are of equal value, at a rental of $20,000 per annum and subleases 50 percent of such premises to one or more subtenants receiving a total of $10,000 per annum as rent from such subtenants. Since 50 percent of the rent paid by the taxpayer is applicable to the portion of the premises subleased, 50 percent thereof or $10,000 is excluded in computing the taxpayer's gross rent for such premises. (4) In exceptional cases use of the general method above outlined may result in inaccurate valuations. Accordingly, in such cases any other method which will properly reflect the value may be adopted by the Commissioner of Finance either on his own motion or on request of a taxpayer. Such other method of valuation may not be used by a taxpayer until approved by the Commissioner. Any such request shall set forth full information with respect to the property, together with the basis for the valuation proposed by the taxpayer. Such other method once approved by the Commissioner may be used by the taxpayer in its reports for subsequent years until the facts upon which such other method is based are materially changed.

19 RCNY § 11-65 Receipts Factor.

§ 11-65 Receipts Factor. (a) General. (1) The percentage of the taxpayer's business receipts within New York City is determined by (i) ascertaining the taxpayer's business receipts within New York City during the period covered by the report and (ii) dividing the sum of such receipts by the taxpayer's total business receipts within and without New York City during such period. (2) The following receipts are allocable to New York City: (i) one hundred percent of receipts from sales of tangible personal property where shipment is made to points within New York City; (ii) one hundred percent of receipts from services performed in New York City; (iii) one hundred percent of rentals from property situated in New York City; (iv) one hundred percent of royalties from the use in New York City of patents and copyrights; (v) all other business receipts earned in New York City. All such receipts of the period covered by the report (computed on the cash or accrual basis, in accordance with the method of accounting used in the computation of the taxpayer's entire net income) must be taken into account. (3) If a taxpayer receives a lump sum in payment for services and also for materials or other property, the sum received must be apportioned on a reasonable basis. That part apportioned to services performed is includible in receipts from services performed, and that part apportioned to materials or other property is includible in receipts from sales. Full details must be submitted with the taxpayer's report. (b) Compensation for services. (1) Receipts from services performed within New York City are allocable to New York City. All amounts received by the taxpayer in payment for such services are so allocable, irrespective of whether such services were performed by employees or agents of the taxpayer, by subcontractors, or by any other persons. It is immaterial where such amounts were payable or where they actually were received. (2) Commissions received by the taxpayer are allocated to New York City if the services for which the commissions were paid were performed in New York City. If the taxpayer's services for which commissions were paid were performed for the taxpayer by salesmen attached to or working out of a New York City office of the taxpayer, the taxpayer's services will be deemed to have been performed in New York City. Example: The taxpayer is a New York City sales agent of a Pennsylvania manufacturer and receives in New York City an order from a New Jersey customer. The order is forwarded to the manufacturer which accepts it and fills it by shipment direct to the customer. The taxpayers commission is allocable to New York City. (3) (i) Where a lump sum is received by the taxpayer in payment for services within and without New York City, the amount attributable to services within New York City is to be determined on the basis of the relative values of, or amounts of time spent in performance of, such services within and without New York City, or by some other reasonable method. Full details must be submitted with the taxpayer's report. (See also 19 RCNY § 11-65(a)(3).) (ii) The broadcasting of radio and television programs and commercial messages by way of radio and television antenna pursuant to a license granted by the Federal Communications Commission is deemed to be a service. When a lump sum is received for such service, that lump sum shall be allocated within and without New York City according to the number of listeners or viewers within and without New York City. (c) Rents and royalties. (1) Receipts from rentals of real and personal property situated in New York City, and royalties from the use in New York City of patents or copyrights, are allocable to New York City. Receipts from rentals include all amounts received by the taxpayer for the use or occupation of property, whether or not such property is owned by the taxpayer. (2) Receipts from royalties include all amounts received by the taxpayer for the use of patents or copyrights, whether or not such patents or copyrights were originally issued to or are owned by the taxpayer. A patent or copyright is used in New York City to the extent that activities thereunder are carried on in New York City. (d) Receipts from trucking. Receipts from trucking may be allocated to New York City on the percentage that mileage within New York City bears to total mileage within and without New York City, or on the percentage that the time operated within New York City bears to the total time operated within and without New York City. (e) Other business receipts. (1) All business receipts earned by the tax payer within New York City are allocable to New York City. Business receipts are not considered to have been earned by the taxpayer in New York City solely by reason of the fact that they were payable in New York City or actually were received in New York City. (2) Receipts from sales or capital assets (property not held by the taxpayer for sale to customers in the regular course of business) are not business receipts. Receipts from the sale of real property held by the taxpayer as a dealer for sale to customers in the regular course of business are business receipts and are allocable to New York City if the real property was situated in New York City. Receipts from sales of intangible personal property included in business capital, held by the taxpayer as a dealer for sale to customers in the regular course business, are business receipts and are allocable to New York City if the sales were made in New York City or through a regular place of business of the taxpayer in New York City. (f) Receipts factor on combined reports. In the case of combined reports, intercompany business receipts – receipts by any corporation included in the combined report from any other corporation included in such report – are eliminated in computing the percentage of business receipts within New York City. As to when combined reports will be permitted or required, see 19 RCNY § 11-91 infra.

19 RCNY § 11-66 Payroll Factor.

§ 11-66 Payroll Factor. (a) Computation of payroll factor. (1) The percentage of the taxpayer's payroll allocable to New York City is determined by dividing the wages, salaries and other personal service compensation of the taxpayer's employees (except general executive officers) within New York City during the period covered by the report, by the total amount of compensation of all the taxpayer's employees (except general executive officers) during such period. (2) Wages, salaries and other compensation include all amounts paid in good faith for services to the taxpayer, but do not include amounts paid by the taxpayer which do not have in them the element of compensation for personal services actually rendered or to be rendered. (3) Wages, salaries and other compensation are computed on the cash or accrual basis, in accordance with the method of accounting used in the computation of the entire net income of the taxpayer. (4) Employees within New York City include all employees regularly connected with or working out of an office or place of business of the taxpayer within New York City, irrespective of where the services of such employees were performed. However, if the taxpayer establishes to the satisfaction of the Commissioner of Finance that, because of the fact that a substantial part of its payroll was paid to employees attached to a New York City office who performed a substantial part of their services outside New York City, the computation of the payroll factor according to the general rule stated above would not produce an equitable result, the Commissioner of Finance may, in his discretion, permit the payroll factor to be computed on the basis of the amount of compensation paid for services actually rendered within and without the City. On the other hand, wherever it appears that, because a substantial part of the taxpayer's payroll was paid to employees attached to offices outside the City who performed a substantial part of their services within the City, the computation of the payroll factor according to the general rule would not properly reflect the amount of the taxpayer business done within New York City by its employees, the Commissioner of Finance may require the payroll factor to be computed on the basis of the amount of compensation paid for services performed within and without the City. In any case, where an employee performs services both within and without the City, the amount treated as compensation for services performed within the City will be deemed to be: (i) in the case of an employee whose compensation depended directly on the volume of business secured by him, such as a salesman on a commission basis, the amount received by him for the business attributable to his efforts within New York City; (ii) in the case of an employee whose compensation depended on other results achieved, the proportion of the total compensation which the value of his services within New York City bears to the value of all his services; and (iii) in the case of an employee compensated on a time basis, the proportion of the total amount received by him which the working time employed within New York City bears to the total working time. (b) Definition of employees. (1) Employees, whose wages, salaries and other personal service compensation are included in the computation of the payroll factor of the business allocation percentage, include every individual (except a general executive officer) where the relationship existing between the taxpayer and such individual is that of employer and employee. (2) Generally, the relationship of employer and employee exists when the taxpayer has the right to control and direct the individual not only as to the result to be accomplished by him but also as to the means by which such result is to be accomplished. If the relationship of employer and employee exists, the designation or description of the relationship, and the measure, method or designation of the compensation, are immaterial. (3) A director of a corporation is not an employee, and, therefore, compensation paid to directors for acting as such should not be included in computing the payroll factor. (c) General executive officers. (1) Personal service compensation paid to general executive officers of the taxpayer for acting as such should not be included in the computation of the payroll factor. (2) General executive officers include the chairman, president, vice president, secretary, assistant secretary, treasurer, assistant treasurer, comptroller, and any other officer, charged with and performing general executive duties of the corporation. An executive officer whose duties or services are restricted to territory either within or without the City is not a general executive officer.

19 RCNY § 11-67 Power of Commissioner of Finance to Adjust Business Allocation Percentage.

§ 11-67 Power of Commissioner of Finance to Adjust Business Allocation Percentage. (§ 11-604(8), Administrative Code.) (a) Generally, the allocation formula hereinbefore described will result in a fair apportionment of the taxpayer's capital and income within and without New York City. However, experience has shown that due to the nature of certain businesses the formula may work hardships in some cases, and not do justice either to the taxpayer or to the City. Accordingly, provision is made whereby, in such cases, the Commissioner of Finance may use some other formula which will more accurately reflect the business activity within New York City. (b) The statute provides that where it appears to the Commissioner of Finance that the business allocation percentage, computed in the manner prescribed by paragraph (a) of subdivision (3) of § 11-604 of the Administrative Code does not properly reflect the activity, business, income or capital of the taxpayer within New York City, the Commissioner of Finance, in his discretion, may adjust business allocation percentage by: (1) excluding one or more of the factors therein, (2) including one or more other factors, such as expenses, purchases, contract values (minus subcontract values), (3) excluding one or more assets in computing any factor entering into the allocation percentage provided the income therefrom is also excluded in determining entire net income, or (4) any other similar or different method calculated to effect a fair and proper allocation. (c) Rulings of general public interest will be published by the Commissioner of Finance from time to time, indicating the circumstances under which, and the manner in which, such adjustments will be made. (d) A taxpayer may not vary the regular statutory formula without the prior consent of the Commissioner of Finance. A taxpayer making application for an adjustment of its business allocation percentage must file its report and compute its tax in accordance with the regular statutory formula. It should also attach a rider to the report setting forth full information on which its application is based, together with a computation of the amount of tax which would be due under the proposed method.

19 RCNY § 11-68 Investment Allocation Percentage.

§ 11-68 Investment Allocation Percentage. (a) Use of investment allocation percentage. (1) A taxpayer, irrespective of whether it has a regular place of business outside New York City, may allocate its investment income and capital within and without New York City by the investment allocation percentage. (2) There are taxpayers which need to determine only an investment allocation percentage, and need not be concerned with a business allocation percentage. Thus, a taxpayer which has only investment income and investment capital allocates its entire net income and capital by the investment allocation percentage. (3) (i) For tax years beginning before January 1, 1989, if the investment income (before allowance of any net operating loss deduction) of a taxpayer not reporting on a combined basis is more than 85 percent of its entire net income (before allowance of any net operating loss deduction) and its investment capital is more than 85 percent of its total business and investment capital, it may elect to allocate its entire net income and total business and investment capital by the investment allocation percentage. (ii) Except as provided in subparagraph (i) of this subdivision, if a taxpayer has both business and investment capital, but has only investment income or has investment income and a business loss, the taxpayer must allocate its entire net income and its investment capital by the investment allocation percentage. Its business capital is allocated by the business allocation percentage. (b) Computation of investment allocation percentage. (§ 11-604(3)(b), Administrative Code.) (1) The investment allocation percentage is computed as follows: (i) Ascertain the average net value of each stock, bond or other security, other than governmental securities, included in the taxpayer's investment capital, pursuant to subdivision (b) of 19 RCNY § 11-38. The phrase "stock, bond or other security" as used in this paragraph does not include cash, even if treated as investment capital pursuant to 19 RCNY § 11-37(a)(2) of these regulations. (ii) Multiply the net value of each such stock, bond or other security by its issuer's allocation percentage. (iii) Add all the products determined in paragraph (ii) of this subdivision. (iv) Divide the sum obtained in paragraph (iii) of this subdivision by the net value of the taxpayer's total investment capital, exclusive of cash even if such cash is treated as investment capital pursuant to 19 RCNY § 11-37(a)(2). (2) (i) The issuer's allocation percentage of an issuer of or obligor (other than an issuer or obligor subject to tax under Title 11, Chapter 6, Subchapter 3, Part 4 of the Administrative Code and other than in the case of an option on a stock or bond index or an option on a futures contract on such an index) on a stock, bond or other security constituting investment capital is computed as follows: Tax Applicable to Issuer or Obligor: Issuer's Allocation Percentage: Administrative Code Title 11, Chapter 6, Subchapter 4 (Transportation Corporation Tax) percentage of issued capital stock required to be allocated within New York City on its report for the preceding year Administrative Code Title 11, Chapter 11 (Utility Tax) percentage equal to a fraction, the numerator of which is the gross income of a utility corporation included on its New York City Utility Tax reports for periods during the preceding year, and the denominator of which is the gross income of the corporation as defined in Title 11, Chapter 11 of the Code for such periods, except that it shall include income from sources within and without the City. Administrative Code Title 11, Chapter 6, Subchapter 2 (General Corporation Tax) percentage of entire capital required to be allocated within New York City on its report for the preceding year (equal to the sum of allocated business capital, allocated investment capital and allocated subsidiary capital divided by the sum of business capital, investment capital and subsidiary capital). (ii) In the case of an issuer or obligor subject to tax under Title 11, Chapter 6, Subchapter 3, Part 4 of the Administrative Code, the issuer's allocation percentage shall be determined as follows: (A) In the case of a banking corporation described in § 11-640(a)(1) - (8) of the Administrative Code that is organized under the laws of the United States, this state or any other state of the United States, the issuer's allocation percentage shall be its alternative entire net income allocation percentage, as defined in § 11-642(c) of the Administrative Code, for the preceding year. In the case of such a banking corporation whose alternative entire net income for the preceding year is derived exclusively from business carried on within the city, its issuer's allocation percentage shall be 100 percent. (B) In the case of a banking corporation described in § 11-640(a)(2) of the Administrative Code that is organized under the laws of a country other than the United States, the issuer's allocation percentage shall be determined by dividing (i) the amount described in § 11-642(a)(2)(A)(i) of the Administrative Code with respect to such issuer or obligor for the preceding year, by (ii) the gross income of such issuer or obligor from all sources within and without the United States, for such preceding year whether or not included in alternative entire net income for such year. (C) In the case of an issuer or obligor described in § 11-640(a)(9) or 11-640(d)(2) of the Administrative Code, the issuer's allocation percentage shall be determined by dividing the portion of the entire capital of the issuer or obligor allocable to the city for the preceding year by the entire capital, wherever located, of the issuer or obligor for the preceding year. (iii) For purposes of paragraphs (i) and (ii) of this subdivision, in determining an issuer's allocation percentage, the term "preceding year" means the taxable year of the issuer or obligor ending during the taxpayer's immediately prior taxable year. In general, if no taxable year of the issuer or obligor ends within the taxpayer's immediately prior taxable year, then the term "preceding year" means the latest taxable year of the issuer or obligor ending before the taxpayer's immediately prior taxable year. If an issuer or obligor was not required to file a report or return for the preceding year, as defined above, the issuer's allocation percentage is zero. The taxable year of an issuer or obligor that is a utility corporation subject to tax under Title 11, Chapter 11 of the Administrative Code is the utility's federal taxable year. (iv) If a report or reports for the preceding year are required but not filed, or if filed do not contain information that would permit the determination of such issuer's allocation percentage, then, at the discretion of the Department of Finance, the issuer's allocation percentage to be used shall be either (A) the issuer's allocation percentage derived from the most recently filed report or return of the issuer or obligor, or (B) a percentage calculated by the Department of Finance to reasonably indicate the degree of economic presence in the City of the issuer or obligor during the preceding year. (v) The issuer's allocation percentage of an option on a stock or bond index, or an option on a futures contract on such an index, will be calculated by the Department of Finance in such a manner as to reasonably indicate the economic presence in the City of the issuers of and obligors on the stocks, bonds or other securities included in the computation of the indexes. (vi) Issuers or obligors. (A) The issuer of stock is the corporation a portion of the equity of which is represented by such stock. Thus, the issuer of X Corporation stock is X Corporation; the issuer of Federal National Mortgage Association stock is the Federal National Mortgage Association. (B) The issuer of, or obligor on, a bond or note is the maker of the instrument. A guarantor of a bond or note is not the issuer or obligor. (C) The issuer of, or obligor on, a banker's acceptance is the accepting bank, irrespective of endorsements by other banks. Where banker's acceptances have been acquired in aggregate form, as in round lot trading, each banker's acceptance shall be treated separately for purposes of this paragraph. (D) The issuer of, or obligor on, a trade acceptance is the party that has accepted the draft. (E) The issuer of, or obligor on, an option is the entity which is the issuer of, or obligor on, the item that is the subject of the option unless the subject of the option is a stock or bond index or a futures contract on such an index. For the computation of the issuer's allocation percentage of an option on a stock or bond index or of an option on a stock or bond index or of an option on a futures contract on such an index, see § 11-68(2)(v) of these regulations. (F) The issuer of, or obligor on, a stock which may be acquired when such right or warrant is exercised. (G) The issuer of assets reflected in the taxpayer's books and records in connection with futures or forward contracts that constitute investment capital is the issuer of the asset, the taxpayer's position in which is hedged by the contract. (3) The issuer's allocation percentage with respect to any stock, bond or other security may be obtained from the Department of Finance upon the written request of any corporation subject to tax under Subchapter 2 of Chapter 6 of Title 11 of the Administrative Code. The request must be in duplicate and specify the correct name of each entity for which an issuer's allocation percentage is needed. (c) Discretionary adjustment of investment allocation percentage. (§ 11-604(8), Administrative Code.) (1) Where it appears to the Commissioner of Finance that the investment allocation percentage, computed in the manner prescribed by paragraph (b) of subdivision 3 of § 11-604 of the Administrative Code does not properly reflect the investment activity, business, income or capital of the taxpayer within New York City, the Commissioner of Finance, in his discretion, may adjust such investment allocation percentage by excluding any asset therefrom, provided the income from such asset is also excluded in determining entire net income. (2) Rulings of general public interest will be published by the Commissioner of Finance from time to time, indicating the circumstances under which, and the manner in which, such adjustments will be made.

19 RCNY § 11-69 Allocation of Entire Net Income.

§ 11-69 Allocation of Entire Net Income. (a) Allocation of entire net in-come. (1) A taxpayer allocates its entire net income by the business allocation percentage (19 RCNY §§ 11-63 through 11-67, supra) in the following cases: (i) if it has only business income; or (ii) if it has both business income and investment income, but has the right to and does elect to allocate its entire net income by its business allocation percentage (19 RCNY § 11-63(a), supra) or (iii) if it has business income and an investment loss. (2) A taxpayer allocates its entire net income by the investment allocation percentage (19 RCNY § 11-68, supra) in the following cases: (i) if it has only investment income; or (ii) if it has both business income and investment income, but has the right to and does elect to allocate its entire net income by its investment allocation percentage (19 RCNY § 11-68(a), supra); or (iii) if it has investment income and a business loss. (3) Any taxpayer which has both business income and investment in come, and which cannot or does not elect to allocate its entire net income by either its business allocation percentage or its investment allocation percentage, allocates its entire net income by using both the business allocation percentage and the investment allocation percentage, as follows: (i) business income is multiplied by the business allocation percentage; (ii) investment income is multiplied by the investment allocation percentage; (iii) The two products thus obtained are added together. The sum thus obtained is the portion of the taxpayer's entire net income allocable to New York City. This is so because the taxpayer's entire net income is, in every case, the sum of its business income plus its investment income. If a net operating loss deduction is allowable in computing entire net income (see 19 RCNY § 11-28 supra), such deduction should be apportioned between business income and investment income before multiplying by the allocation percentage (see 19 RCNY § 11-69(d), infra). (4) If a taxpayer's investment allocation percentage is zero, interest received on bank accounts is allocated by the business allocation percentage. (See 19 RCNY § 11-69(d), infra, for application of allocation percentage where net operating loss deduction is involved.) (b) Definitions. Business Income. (§ 11-602(7), Administrative Code.) "Business income" means entire net income minus investment income. For definition of entire net income, see 19 RCNY § 11-27, supra. For definition of investment income, see 19 RCNY § 11-69(b)(2), infra. Investment Income. (§ 11-602(5), Administrative Code.) (i) (A) The term "investment income" means income from investment capital to the extent included in computing entire net income, less any deductions allowable in computing entire net income that are directly or indirectly attributable to investment capital or investment income and sell such portion of any net operating loss deduction allowable in computing entire net income as described in 19 RCNY § 11-69(d). Income from investment capital includes dividends from investment capital, interest from investment capital and capital gains in excess of capital losses from the sale or exchange of investment capital. (B) Investment income also includes gain (or loss) from closing out a position in a futures or forward contract if such contract substantially diminishes the taxpayer's risk of loss from holding one or more positions in assets that constitute investment capital. If the taxpayer holds more positions in futures or forward contracts than are reasonably necessary to substantially diminish its risk of loss from holding such positions in assets constituting investment capital, the gain (or loss) attributable to any such excess positions in futures or forward contracts is not investment income. (C) Investment income also includes gain (or loss) from short sales of assets that constitute investment capital. (D) Investment income also includes gain (or loss) from closing out a position in a futures or forward contract if such contract substantially diminishes the taxpayer's risk of loss from making short sales of assets that constitute investment capital. If the taxpayer holds more positions in futures or forward contracts than are reasonably necessary to substantially diminish its risk of loss from such sales, the gain (or loss) attributable to any such excess positions in futures or forward contracts is not investment income. (E) Investment income also includes premium income from unexercised covered call option if the item which covers the call is an asset constituting investment capital. However, premium income from unexercised naked call options and premium income from unexercised put options is not investment income. (ii) In no case may investment income be greater than entire net income. If a taxpayer has no business income, its investment income shall be deemed to be equal to its entire net income. For the definition of investment capital, see 19 RCNY § 11-37. (iii) In computing investment income, dividends and interest from investment capital are includible in the same manner and to the same extent as in computing entire net income. Thus, where only one half of dividends from nonsubsidiary corporations is included in computing entire net income under § 11-602.8(a)(2), only one half of such dividends is included in computing investment income. Capital gains and losses are included in computing entire net income in the same manner and to the same extent as for Federal income tax purposes, subject to the modification provided in § 11-602.8(h). Accordingly, in computing investment income, capital gains and losses from sales and exchanges of assets constituting investment capital are included in the same manner and to the same extent as for Federal income tax purposes, subject to the modification provided in § 11-602.8(h). (c) Deduction of expenses. (§ 11-602(5), Administrative Code.) (1) Investment income must be reduced by any deductions, allowable in computing entire net income, which are directly or indirectly attributable to investment capital or investment income. Deductions allowable in computing investment income are not to be taken into account in computing business income. (2) Deductions allowable in computing entire net income which are directly attributable to investment capital or investment income include, among others: interest incurred to carry investment capital, safe deposit box rentals, financial news subscriptions, salaries of officers and employees engaged in the management and conservation of stocks, bonds and other securities included in investment capital, investment counsel fees, custodian fees, the cost of insurance and fidelity bonds covering investment capital, and legal expenses relating to investment capital. (d) Net operating loss deduction. (1) Investment income is reduced by such portion of any net operating loss deduction allowable in computing entire net income as the investment income before such deduction bears to entire net income before such deduction. (See: 19 RCNY § 11-28, supra, for allowable net operating loss deduction.) (2) The effect of such reduction is to apportion the net operating loss deduction between business and investment income for the current year in the proportion that such income bears to entire net income for the current year, so that a portion of the net operating loss deduction will be allocated on the basis of the allocation percentage applicable to the current year's investment income and a portion on the basis of the allocation percentage applicable to the current year's business income. Example 1: Taxpayer's entire net income for 1966 is $200,000, consisting of $50,000 of investment income and $150,000 of business income. Its investment allocation percentage is 15 percent. Its business allocation percentage is 100 percent. It has an allowable net operating loss deduction of $100,000 for a loss sustained in 1967. Its investment income is $25,000 ([$50,000 - $50,000 × $100,000]), $200,000 which is allocable 15 percent to New York City. Its business income is $75,000 ([$150,000 - $150,000 × $100,000]), $200,000 which is allocable 100 percent to New York City. Thus, 25 percent of the net operating loss deduction is allocated on the basis of the investment allocation percentage of the current year and 75 percent is allocated on the basis of the business allocation percentage of the current year. (3) If the investment allocation percentage of a taxpayer is zero, interest on bank accounts and obligations of the United States and its instrumentalities and obligations of New York State, its political subdivisions and its instrumentalities should (except as otherwise provided in 19 RCNY § 11-69(a)(4), supra) be added to business income before the apportionment of any net operating loss deduction, since such interest is treated as business income for allocation purposes. Example 2: If the investment allocation percentage of the taxpayer in Example 1 was zero and $30,000 of its investment income was from United States government bonds, its investment income after allowance of the net operating loss deduction is $10,000 ([$20,000 - $20,000 × $100,000]), $200,000 none of which is allocable to New York City. Its business income after allowance of the net operating loss deduction is $90,000 ([$180,000 - $180,000 × $100,000]), $200,000 100 percent of which is allocable to New York City.

19 RCNY § 11-70 Allocation of Business and Investment Capital.

§ 11-70 Allocation of Business and Investment Capital. (a) General. (1) A taxpayer may not allocate any of its business capital without New York City unless it had a regular place of business outside New York City during some part of the year covered by the report. But a corporation may allocate its investment capital by its investment allocation percentage, even if all of its business and its only office were in New York City. (2) Business capital allocable to New York City is computed by multiplying business capital by the business allocation percentage. Investment capital allocable to New York City is computed by multiplying investment capital by the investment allocation percentage. The sum of the products so obtained is the taxpayer's total business and investment capital allocable to New York City. (3) Where the investment income (before allowance of any net operating loss deduction) of a taxpayer not reporting on a combined basis is more than 85 percent of its entire net income (before allowance of any net operating loss deduction) and its investment capital is more than 85 percent of its total business and investment capital, it may elect to allocate its total business and investment capital by the investment allocation percentage (see 19 RCNY § 11-68(a), supra). Also, where the business income (before allowance of any net operating loss deduction) of a taxpayer not reporting on a combined basis is more than 75 percent of its entire net income (before allowance of any net operating loss deduction) and its business capital is more than 75 percent of its total business and investment capital, it may elect to allocate its total business and investment capital by the business allocation percentage (see: 19 RCNY § 11-63(a), supra). (b) Allocation of business capital. (§ 11-604(4), Administrative Code.) In computing the tax measured by business and investment capital, the business capital of the taxpayer allocable to New York City is determined by multiplying business capital, determined as provided in 19 RCNY §§ 11-36(a) through 11-43, supra, by the business allocation percentage, determined as provided in 19 RCNY §§ 11-63 through 11-66, supra, unless the taxpayer has the right to and does elect to allocate its total business and investment capital by the investment allocation percentage (see: 19 RCNY § 11-68(a), supra). (c) Allocation of investment capital. (§ 11-604(5), Administrative Code.) In computing the tax measured by business and investment capital, the investment capital allocable to New York City is determined by multiplying investment capital, determined as provided in 19 RCNY § 11-36 "investment capital" and 19 RCNY §§ 11-37 through 11-43, supra, by the investment allocation percentage, determined as provided in 19 RCNY § 11-68, supra, unless the taxpayer has the right to and does elect to allocate its total business and investment capital by the business allocation percentage (see: 19 RCNY § 11-63(a), supra).

19 RCNY § 11-71 Allocation of Subsidiary Capital.

§ 11-71 Allocation of Subsidiary Capital. (§ 11-604(7), Administrative Code.) Every taxpayer irrespective of whether it has a regular place of business outside New York City is entitled to allocate its subsidiary capital within and without New York City. The subsidiary capital of the taxpayer allocable to New York City is computed as follows: (a) multiply the average fair market value (determined as provided in 19 RCNY §§ 11-39 and 11-40, supra) of its subsidiary capital (determined as provided in 19 RCNY § 11-46 "Subsidiary Capital" and 19 RCNY § 11-47, supra) invested in each subsidiary during the period covered by the taxpayer's report by the percentage of the entire capital or issued capital stock, gross direct premiums (in the case of an insurance company) or net income (in the case of a bank or trust company) of such subsidiary required to be allocated within New York City on any report or reports required of it under Chapter 6 or Chapter 11 of Title 11 of the Administrative Code, for the preceding year; (b) multiply the cash and obligations of the United States and its instrumentalities and obligations of New York State, its political subdivisions and its instrumentalities treated as subsidiary capital, if any, (see: 19 RCNY § 11-46 "Subsidiary Capital," supra) by the weighted average of the percentage used in (a), above; (c) add the products so obtained.

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/0-0-0-37075Fetched: 10/24/2026