§ 11-69 Allocation of Entire Net Income.
RCNY § 11-69
(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.
(d)Net operating loss deduction.
