§ 15-04 Eligible Gross Income.
RCNY § 15-04
(§ 11-641(f)(2), Administrative Code) (a) Eligible gross income includes gross income derived from making, arranging for, placing, or servicing loans to foreign persons, except that such gross income derived from those foreign persons described in 19 RCNY § 15-04(b) is eligible gross income only when substantially all the proceeds of the loan are for use outside the United States. Eligible gross income includes fees, such as arrangement, commitment, and letter of credit fees received from foreign persons regardless of when or whether the loans are made, and management fees from servicing loans to foreign persons. Eligible gross income includes interest income received from a loan made to or a deposit placed with a foreign person which was purchased without recourse as against any prior owner and meets the restrictions set forth in 12 C.F.R. § 204.122. Eligible gross income does not include income received from the purchasing or selling of assets from or to third parties, such as loans (including loan participations), securities, certificates of deposits, and bankers' acceptances.
(b)Gross income derived from making, arranging for, placing, or servicing a loan to a foreign person which is: (1) a nonresident individual; (2) a foreign branch of a domestic corporation (other than a foreign branch of a domestic bank); (3) a foreign corporation which is 80 percent or more owned or controlled, either directly or indirectly, by one or more domestic corporations (except corporations which are banks), domestic partnerships, or resident individuals; or (4) a foreign partnership which is 80 percent or more owned or controlled, either directly or indirectly, by one or more domestic corporations (except corporations which are banks), domestic partnerships, or resident individuals; is eligible gross income only when substantially all the proceeds of the loan re for use outside the United States. For purposes of this subdivision, "substantially all the proceeds of the loan are for use outside of the United States" means that at least 95 percent of the proceeds of the loan must be used outside the United States to finance the operations of the borrower or its affiliates located outside the United States. An affiliate is a corporation or partnership which is 80 percent or more owned or controlled, either directly or indirectly, by the borrower. The use of proceeds requirement for New York City tax purposes is deemed to be satisfied based on the stated purpose of the loan and a written statement of the foreign person to whom a loan is made stating that such foreign person, or another foreign person that is affiliated with such foreign person, will use the proceeds of the loan outside the United States. The written statement may be in the form of a representation or covenant in any agreement relating to the loan or a separate certificate or other written statement of the foreign person, such as the model statement set forth by the Federal Reserve Board. If the taxpayer is unable to obtain such a written statement, the Commissioner of Finance will consider other evidence that the proceeds of the loan are for use outside the United States. For purposes of this subdivision, the term "owned or controlled, either directly or indirectly" means, in the case of a corporation, the power to direct or cause the direction of the management and policies of [a corporation, whether through the ownership of at least 80 percent of the voting stock of such corporation or through the ownership of at least 80 percent of the voting stock of any other corporation which possesses such power, or, in the case of a partnership, the power to direct or cause the direction of the management and policies of] the partnership, or ownership of at least 80 percent of the profits interest or at least 80 percent of capital interest of such partnership.
(c)Eligible gross income includes gross income derived from making or placing deposits, if the related asset is recorded in the financial accounts of the IBF, with foreign persons which are: (1) banks; (2) foreign branches of a bank, including foreign branches of the taxpayer; (3) foreign banks which are subsidiaries of a bank, including foreign banks which are subsidiaries of the taxpayer; or (4) other IBFs. The term "deposit" as used in this subdivision means the amount of money received or held by such foreign person for which it has given or is obligated to give credit, either conditionally or unconditionally, to a deposit liability account, including interest credited to such account, or which is evidenced by such foreign person's certificate of deposit.
(d)Eligible gross income includes gross income derived from foreign exchange trading or hedging transactions that are solely entered into for or directly traceable to any of the transactions described in 19 RCNY § 15-04(a), (b) and (c). Gross income from foreign exchange trading or hedging transactions related to a deposit (as defined in 19 RCNY § 15-01, "deposit" supra) from a foreign person, is eligible gross income when such deposit can be traced directly to a transaction described in 19 RCNY § 15-04(a), (b) and (c). A foreign exchange trading or hedging transaction is not solely entered into for or directly traceable to any of the transactions described in 19 RCNY §§ 15-04(a), (b) and (c) unless the foreign exchange trading or hedging transaction is recorded in the financial accounts of the IBF. The term "foreign exchange trading or hedging transaction" as used in this subdivision means: (1) the purchase, sale, or exchange of foreign currency; or (2) the acquisition, disposition, or performance of any contract to purchase, sell, or exchange foreign currency at a future date under terms fixed in the contract if the contract hedges a foreign currency denominated loan or deposit. A forward contract hedges such foreign currency denominated loan or deposit if the effect of a change in the value of the foreign currency on the United States dollar value of the forward contract, either alone or in combination with other such contracts, offsets the effect of the change on the United States dollar value of such foreign currency denominated loan or deposit. A hedging relationship may be established by reference to particular facts and circumstances (for example, the amount of the forward contract, particular currency, initial date, and maturity) indicating a hedging purpose, or by designating a contract as being intended for the purpose of hedging a loan or deposit.
