§ 4 — Computation of tax

New York § 4

• Jurisdiction: New York
• Law GCM: General City Model 772/66
• Part 2: General Corporation Tax

Text

§ 4. Computation of tax. * 1. The tax imposed by subdivision one of\nsection three of this part shall be, in the case of each taxpayer: (a) a\ntax (1) for taxable years beginning on or after January first, nineteen\nhundred seventy-eight but before January first, nineteen hundred\neighty-seven, computed at the rate of nine per centum, and for taxable\nyears beginning on or after January first, nineteen hundred\neighty-seven, computed at the rate of eight and eighty-five one\nhundredths per centum on its entire net income, or the portion thereof\nallocated within the city as hereinafter provided, subject to any\nmodification required by paragraph (d) of subdivision three of this\nsection, or (2) computed at one and one-half mills for each dollar of\nits total business and investment capital, or the portion thereof\nallocated within the city as hereinafter provided, except that in the\ncase of a cooperative housing corporation as defined in the internal\nrevenue code, the applicable rate shall be four-tenths of one mill, or\n(3) for taxable years beginning on or after January first, nineteen\nhundred seventy-eight but before January first, nineteen hundred\neighty-seven, computed at the rate of nine per centum, and for taxable\nyears beginning on or after January first, nineteen hundred\neighty-seven, computed at the rate of eight and eighty-five one\nhundredths per centum on thirty per centum of the taxpayer's entire net\nincome plus salaries and other compensation paid to the taxpayer's\nelected or appointed officers and to every stockholder owning in excess\nof five per centum of its issued capital stock minus fifteen thousand\ndollars (except as hereinafter provided) and any net loss for the\nreported year, or on the portion of such sum allocated within the city\nas hereinafter provided for the allocation of entire net income, subject\nto any modification required by paragraph (d) of subdivision three of\nthis section, or (4) one hundred twenty-five dollars, whichever is the\ngreatest, plus (b) a tax computed at the rate of three-quarters of a\nmill for each dollar of the portion of its subsidiary capital allocated\nwithin the city as hereinafter provided. In the case of a taxpayer which\nis not subject to tax for an entire year, or which elects to compute its\ntax pursuant to paragraph (b) of subdivision six of section three, the\nexemption allowed in clause three of paragraph (a) shall be prorated\naccording to the period such taxpayer was subject to tax or, in the case\nof such an election, the period for which its entire net income is\ndetermined pursuant to such paragraph (b) of subdivision six of section\nthree.\n * NB Effective until December 31, 2020\n * 1. The tax imposed by subdivision one of section three of this part\nshall be, in the case of each taxpayer: (a) a tax (1) computed at the\nrate of five and one-half per centum, or as an alternative for taxable\nyears beginning on or after January first, nineteen hundred seventy-one,\nat the rate of six and seven-tenths per centum, on its entire net\nincome, or the portion thereof allocated within the city as hereinafter\nprovided, subject to any modification required by paragraph (d) of\nsubdivision three of this section, or (2) computed at one mill for each\ndollar of its total business and investment capital, or the portion\nthereof allocated within the city as hereinafter provided, except that\nin the case of a cooperative housing corporation as defined in the\ninternal revenue code, the applicable rate shall be one-quarter of one\nmill, or (3) computed at the rate of five and one-half per centum, or as\nan alternative for taxable years beginning on or after January first,\nnineteen hundred seventy-one, at the rate of six and seven-tenths per\ncentum, on thirty per centum of the taxpayer's entire net income plus\nsalaries and other compensation paid to the taxpayer's elected or\nappointed officers and to every stockholder owning in excess of five per\ncentum of its issued capital stock minus fifteen thousand dollars\n(except as hereinafter provided) and any net loss for the reported year,\nor on the portion of such sum allocated within the city as hereinafter\nprovided for the allocation of entire net income, subject to any\nmodification required by paragraph (d) of subdivision three of this\nsection, or (4) twenty-five dollars, whichever is the greatest, plus (b)\na tax computed at the rate of one-half mill for each dollar of the\nportion of its subsidiary capital allocated within the city as\nhereinafter provided. In the case of a taxpayer which is not subject to\ntax for an entire year, or which elects to compute its tax pursuant to\nparagraph (b) of subdivision six of section three, the exemption allowed\nin clause three of paragraph (a) shall be prorated according to the\nperiod such taxpayer was subject to tax or, in the case of such an\nelection, the period for which its entire net income is determined\npursuant to such paragraph (b) of subdivision six of section three.\n * NB Effective December 31, 2020\n 2. The amount of subsidiary capital, investment capital and business\ncapital shall each be determined by taking the average fair market value\nof the gross assets included therein (less, in the case of business\ncapital, average liabilities deductible therefrom which are payable by\ntheir terms on demand or within one year from the date incurred, other\nthan loans or advances outstanding for more than a year as of any date\nduring the year covered by the report), and, if the period covered by\nthe report is other than a period of twelve calendar months, by\nmultiplying such value by the number of calendar months or major parts\nthereof included in such period, and dividing the product thus obtained\nby twelve.\n 3. The portion of the entire net income of a taxpayer to be allocated\nwithin the city shall be determined as follows:\n (a) multiply its business income by a business allocation percentage\nto be determined by\n (1) ascertaining the percentage which the average value of the\ntaxpayer's real and tangible personal property within the city during\nthe period covered by its report bears to the average value of all the\ntaxpayer's real and tangible personal property wherever situated during\nsuch period;\n (2) ascertaining the percentage which the receipts of the taxpayer,\ncomputed on the cash or accrual basis according to the method of\naccounting used in the computation of its entire net income, arising\nduring such period from\n (A) sales of its tangible personal property located within the city at\nthe time of the receipt of or appropriation to the orders, where\nshipments are made to points within the city,\n (B) sales of its tangible personal property not located at the time of\nthe receipt of or appropriation to the orders at any permanent or\ncontinuous place of business maintained by the taxpayer without the city\nwhere the orders were received or accepted within the city and where\nshipments are made to points within the city,\n (C) sales of its tangible personal property located within the city at\nthe time of the receipt of or appropriation to the orders where shipment\nis made to points outside of the city and sales of its tangible personal\nproperty (except sales described in clause (B)) located without the city\nat the time of the receipt of or appropriation to the orders where\nshipment is made to points within the city, but only to the extent of\nfifty per centum of the receipts from the sales referred to in this\nclause,\n (D) sales of its tangible personal property not located at the time of\nthe receipt of or appropriation to the orders at any permanent or\ncontinuous place of business maintained by the taxpayer without the\ncity, where the orders were received or accepted within the city and\nwhere shipment is made between points outside the city, but only to the\nextent of fifty per centum of the receipts from the sales referred to in\nthis clause. For purposes of this clause and clause (B) an order shall\nbe deemed received or accepted within the city if it has been received\nor accepted by an employee, agent, agency or independent contractor\nchiefly situated at, connected with, by contract or otherwise, or sent\nout from a permanent or continuous place of business of the taxpayer\nwithin the city,\n (E) services performed within the city,\n (F) rentals from property situated and royalties from the use of\npatents or copyrights, within the city, and\n (G) all other business receipts earned within the city,\nbear to the total amount of the taxpayer's receipts, similarly computed,\narising during such period from all sales of its tangible personal\nproperty, services, rentals, royalties and all other business\ntransactions, whether within or without the city;\n (3) ascertaining the percentage of the total wages, salaries and other\npersonal service compensation, similarly computed, during such period of\nemployees within the city, except general executive officers, to the\ntotal wages, salaries and other personal service compensation, similarly\ncomputed, during such period of all the taxpayer's employees within and\nwithout the city, except general executive officers, and\n (4) adding together the percentages so determined and dividing the\nresult by the number of percentages; provided, however, that if the\ntaxpayer does not have a regular place of business outside the city\nother than a statutory office, the business allocation percentage shall\nbe one hundred per centum; and\n (b) multiply its investment income by an investment allocation\npercentage to be determined by\n (1) multiplying the amount of its investment capital invested in each\nstock, bond or other security (other than governmental securities)\nduring the period covered by its report by the percentage, if any, of\nthe entire capital or the issued capital stock, or the gross direct\npremiums, or the net income, as the case may be, of the issuer or\nobligor thereof required to be allocated within the city on the report\nor reports, if any, required of any such issuer or obligor under part\nII, part III, part IV, or part V or under a local law of the city\nimposing a tax on utilities for the preceding year, provided, however,\nthat for taxable years ending in or with calendar year nineteen hundred\nsixty-six, such percentage shall be presumed to be that percentage, if\nany, of the entire capital or the issued capital stock, or the gross\ndirect premiums, or the net income, as the case may be, of the issuer or\nobligor thereof required to be allocated within the state on the report\nor reports, if any, required of any such issuer or obligor under the tax\nlaw or the insurance law for the preceding year, unless the taxpayer\nestablishes the actual percentage which such issuer or obligor would\nhave been required to allocate within the city had part II, part III,\npart IV, or part V been in effect for such year, or which such issuer or\nobligor did allocate within the city under a local law of the city\nimposing a tax on utilities, but without regard to any minimum,\n (2) adding together the sum so obtained, and\n (3) dividing the result so obtained by the total of its investment\ncapital invested during such period in stocks, bonds and other\nsecurities (other than obligations of the United States and its\ninstrumentalities and obligations of the state of New York, its\npolitical subdivisions and its instrumentalities); provided, however,\nthat in case any investment capital is invested in any stock, bond or\nother security during only a portion of the period covered by the\nreport, only such portion of such capital shall be taken into account;\nand provided further, that if a taxpayer's investment allocation\npercentage is zero, interest received on bank accounts, on obligations\nof the United States and its instrumentalities and on obligations of the\nstate of New York, its political subdivisions and its instrumentalities\nshall be multiplied by its business allocation percentage; and\n (c) add the products so obtained.\n (d) At the election of the taxpayer there shall be deducted from the\nportion of its entire net income allocated within the city either or\nboth of the items set forth in subparagraphs one and two of this\nparagraph, except that only one of such deductions shall be allowed with\nrespect to any one items of property.\n (1) Depreciation with respect to any property such as described in\nsubparagraph three of this paragraph, not exceeding twice the\ndepreciation allowed with respect to the same property for federal\nincome tax purposes. Such deduction shall be allowed only upon condition\nthat entire net income be computed without any deduction for the\ndepreciation of the same property, and the total of all deductions\nallowed pursuant to the preceding sentence in any taxable year or years\nwith respect to any property shall not exceed its cost or other basis.\n (2) Expenditures paid or incurred during the taxable year for the\nconstruction, reconstruction, erection or acquisition of any property\nsuch as described in subparagraph three of this paragraph which is used\nor to be used for purposes of research and development in the\nexperimental or laboratory sense. Such purposes shall not be deemed to\ninclude the ordinary testing or inspection of materials or products for\nquality control, efficiency surveys, management studies, consumer\nsurveys, advertising, promotions or research in connection with\nliterary, historical or similar projects. Such deduction shall be\nallowed only on condition that entire net income for the taxable year\nand all succeeding taxable years be computed without the deduction of\nany such expenditures and without any deduction for depreciation of the\nsame property, except to the extent that its basis may be attributable\nto factors other than such expenditures, or in case a deduction is\nallowable pursuant to this subparagraph for only a part of such\nexpenditures, on condition that any deduction allowed for federal income\ntax purposes on account of such expenditures or on account of\ndepreciation of the same property be proportionately reduced in\ncomputing entire net income for the taxable year and all succeeding\ntaxable years. With respect to property which is used or to be used for\nresearch and development only in part, or during only part of its useful\nlife, a proportionate part of such expenditures shall be deductible. If\nall or part of such expenditures with respect to any property shall have\nbeen deducted as provided herein, and such property is used for purposes\nother than research and development to a greater extent than originally\nreported, the taxpayer shall report such use in its report for the first\ntaxable year during which it occurs, and the director of finance may\nrecompute the tax for the year or years for which such deduction was\nallowed, and may assess any additional tax resulting from such\nrecomputation regardless of the time limitations set forth in section\nseventy-four of this title.\n (3) Such deductions shall be allowed only with respect to tangible\nproperty which is depreciable pursuant to section one hundred\nsixty-seven of the internal revenue code, having a situs in the city and\nused in the taxpayer's trade or business, (A) the construction,\nreconstruction or erection of which is completed after December\nthirty-first, nineteen hundred sixty-five, and then only with respect to\nthat portion of the basis thereof or the expenditures relating thereto\nwhich is properly attributable to such construction, reconstruction or\nerection after December thirty-first, nineteen hundred sixty-five, or\n(B) acquired after December thirty-first, nineteen hundred sixty-five by\npurchase as defined in section one hundred seventy-nine (d) of the\ninternal revenue code, if the original use of such property commenced\nwith the taxpayer, commenced in the city and commenced after such date.\n (4) If the deductions allowable for any taxable year, pursuant to this\nsubdivision, exceed the portion of the taxpayer's entire net income\nallocated to the city for such year, the excess may be carried over to\nthe following taxable year or years and may be deducted from the portion\nof the taxpayer's entire net income allocated to the city for such year\nor years.\n (5) In any taxable year when property is sold or otherwise disposed\nof, with respect to which a deduction has been allowed pursuant to\nsubparagraph one or two of this paragraph, the gain or loss thereon\nentering into the computation of federal taxable income shall be\ndisregarded in computing entire net income, and there shall be added to\nor subtracted from the portion of entire net income allocated within the\ncity the gain or loss upon such sale or other disposition. In computing\nsuch gain or loss the basis of the property sold or disposed of shall be\nadjusted to reflect the deduction allowed with respect to such property\npursuant to subparagraph one or two of this paragraph. Provided,\nhowever, that no loss shall be recognized for the purposes of this\nsubparagraph with respect to a sale or other disposition of property to\na person whose acquisition thereof is not a purchase as defined in\nsection one hundred seventy-nine (d) of the internal revenue code.\n 4. The portion of the business capital of a taxpayer to be allocated\nwithin the city shall be determined by multiplying the amount thereof by\nthe business allocation percentage determined as hereinabove provided.\n 5. The portion of the investment capital of a taxpayer to be allocated\nwithin the city shall be determined by multiplying the amount thereof by\nthe investment allocation percentage determined as hereinabove provided.\n 6. Any taxpayer not taxed upon the basis of a combined report, the\ninvestment income of which is less than twenty-five per centum of its\nentire net income and the investment capital of which is less than\ntwenty-five per centum of its total business and investment capital, may\nat its election apply its business allocation percentage to its entire\nnet income and its total business and investment capital. Any taxpayer\nnot taxed upon the basis of a combined report, the investment income of\nwhich is more than eighty-five per centum of its entire net income and\nthe investment capital of which is more than eighty-five per centum of\nits total business and investment capital, may at its election apply its\ninvestment allocation percentage to its entire net income and its total\nbusiness and investment capital. Any taxpayer not taxed upon the basis\nof a combined report, the subsidiary capital of which (computed without\nregard to this sentence) is more than eighty-five per centum of its\ntotal capital, exclusive of cash on hand and on deposit, obligations of\nthe United States and its instrumentalities and obligations of the state\nof New York, its political subdivisions and its instrumentalities, may\nat its election treat as subsidiary capital a proportion of such cash\nand obligations not in excess of the proportion of its subsidiary\ncapital (so computed) to its total capital.\n 7. The portion of the subsidiary capital of a taxpayer to be allocated\nwithin the city shall be determined by (a) multiplying the amount of its\nsubsidiary capital invested in each subsidiary during the period covered\nby its report (or, in the case of any such capital so invested during\nonly a portion of such period, such portion of such capital) by the\npercentage, if any, of the entire capital or the issued capital stock,\nor the gross direct premiums, or the net income, as the case may be, of\nsuch subsidiary required to be allocated within the city on the report\nor reports, if any, required of such subsidiary under this title for the\npreceding year, or which would have been required for such year had this\ntitle been in effect, but without regard to any minimum, (b) multiplying\nthe proportion of cash and obligations of the United States and its\ninstrumentalities and obligations of the state of New York, its\npolitical subdivisions and its instrumentalities treated as subsidiary\ncapital, by the weighted average of the percentages used in clause (a)\nhereof, and (c) adding together the sums so obtained.\n 8. If it shall appear to the director of finance that any business or\ninvestment allocation percentage determined as hereinabove provided does\nnot properly reflect the activity, business, income or capital of a\ntaxpayer within the city, the director of finance shall be authorized in\nhis discretion, in the case of a business allocation percentage, to\nadjust it by (a) excluding one or more of the factors therein, (b)\nincluding one or more other factors, such as expenses, purchases,\ncontract values (minus subcontract values), (c) excluding one or more\nassets in computing such allocation percentage, provided the income\ntherefrom is also excluded in determining entire net income, or (d) any\nother similar or different method calculated to effect a fair and proper\nallocation of the income and capital reasonably attributable to the\ncity, and in the case of an investment allocation percentage to adjust\nit by excluding one or more assets in computing such percentage provided\nthe income therefrom is also excluded in determining entire net income.\nThe director of finance from time to time shall publish all rulings of\ngeneral public interest with respect to any application of the\nprovisions of this subdivision.\n 9. If it shall appear to the director of finance that any business\nallocation percentage determined as hereinabove provided does not\nproperly reflect the activity, business, income or capital of a taxpayer\nwithin the city, the director of finance shall be authorized in his\ndiscretion to adjust it by (a) excluding one or more of the factors\ntherein, (b) including one or more other factors, such as expenses,\npurchases, contract values (minus subcontract values), (c) excluding one\nor more assets in computing such allocation percentage, provided the\nincome therefrom is also excluded in determining entire net income, or\n(d) any other similar or different method calculated to effect a fair\nand proper allocation of the income and capital reasonably attributable\nto the city, and in the case of an investment allocation percentage, to\nadjust it by excluding one or more assets in computing such percentage\nprovided the income therefrom is also excluded in determining entire net\nincome. The director of finance from time to time shall publish all\nrulings of general public interest with respect to any application of\nthe provisions of this subdivision.\n 10. For purposes of this section the taxpayer's real property shall\ninclude not only such property owned by the taxpayer but also such\nproperty rented to it.\n