§ 11-68 Investment Allocation Percentage.
RCNY § 11-68
(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.
(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).
(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.
(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.
