§ 28-03.
RCNY § 28-03
Example 6: Partners in multiple partnerships. AB and BC are partnerships doing business in New York City. B is a partner in both AB and BC. B is a partnership doing business in New York City with a 100% business allocation percentage. For each of its taxable years 1995 and 1996, B's separate UBTI is a loss of ($400x). For each of the taxable years 1995 and 1996, AB's UBTI is $400x. AB pays tax of $16x on that income each year. AB's unincorporated business tax return for each of those years indicates that B's distributive share from AB is $300x and that B's distributive share percentage is 75%. For each of the taxable years 1995 and 1996, BC's UBTI is $1000x. BC pays tax of $40x on that income each year. BC's unincorporated business tax return for each of those years indicates that B's distributive share from BC is $500x and that B's distributive share percentage is 50%. B is subject to the unincorporated business tax and is entitled to a UBT Paid Credit for 1995 and 1996 related to its distributive shares from AB and BC determined as follows: 1995 Separate UBTIDS from ABDS from BCTotal UBTIUBT Liability w/o creditABNANANA$400x$16xACNANANA$1000x$40xB($400x)$300x$500x$400x$16x B's credit with respect to AB: Measure 1: B's distributive share percentage of AB's tax is $12x, determined by multiplying AB's tax of $16x by B's distributive share percentage, 75% Measure 2: B's tax liability on its total UBTI is $16x before any UBT Paid Credit. B's tax liability on its UBTI of $100x without its distributive share from AB ($400x - $300x), would be $4x. The incremental tax effect on B's total UBTI of its distributive share from AB is $12x ($16x - $4x). Therefore, B's UBT Paid Credit allowed with respect to AB is $12x. B's credit with respect to BC: Measure 1: B's distributive share percentage of BC's tax liability is $20x, determined by multiplying BC's tax liability of $40x by B's distributive share percentage of 50%. Measure 2: B's tax liability on its total UBTI of $400x would be $16x. Without its distributive share from BC, B would have a loss of ($100x) on which there would be no tax. The incremental tax effect on B's total UBTI of its distributive share from BC is $16x ($16x - 0). Thus, B's UBT Paid Credit allowed with respect to BC is $16x. Total Credit for 1995: B's total UBT Paid Credit with respect to AB and BC is $28x. However, because B's tax liability on its total UBTI without the credit would be only $16x, the total UBT Paid Credit allowed to B in 1995 is limited to $16x. There is no carryover of the remaining $12x credit to any subsequent year. 1996 Separate UBTIDS – DSP ABDS – DSP BCTotal UBTIUBT Liability w/o creditABNANANA$400x$16xBCNANANA$1000x$40xB($400x)$300x - 75%$500x - 50%$400x$16x B's credit with respect to AB: Measure 1: For 1996, Measure 1 for B is the same as for 1995, $12x. Measure 2: B's total UBTI is $400x, on which the tax liability would be $16x. For purposes of calculating Measure 2 in 1996, B's operating loss of ($400x) is treated as zero so that its total modified UBTI is treated as $800x, on which the tax would be $32x. Without its distributive share of $300x from AB, B's modified UBTI would be $500x on which the tax would be $20x. The incremental tax effect on B's modified UBTI of B's distributive share from AB is $12x ($32x - $20x). Therefore, B's UBT Paid Credit allowed with respect to AB is $12x. Calculation of B's credit with respect to BC: Measure 1: For 1996, Measure 1 for B is the same as for 1995, $20x. Measure 2: B's total UBTI is $400x, on which the tax would be $16x. For purposes of calculating Measure 2 in 1996, B's operating loss of ($400x) treated as zero so that its total modified UBTI is treated as $800x, on which the tax would be $32x. Without its distributive share of $500x from BC, B's UBTI would be $300x, on which the tax would be $12x. Thus, the incremental tax effect of B's distributive share from BC is $20x ($32x - $12x). Thus, B's UBT Paid Credit allowed with respect to BC is $20x. Total Credits for 1996: B's total UBT Paid Credit allowed with respect to AB and BC is $32x ($12x + $20x). However, because B's tax liability without the credits would be only $16x, the credit that B can take in the taxable year 1996 is limited to $16x, B's tax liability. The $16x of credits taken in 1996 is deemed to be composed of $6x of the UBT Paid Credit allowed with respect to AB ($16x × $12x/$32x) and $10x of the UBT Paid Credit allowed with respect to BC ($16x × $20x/$32x). See subparagraph (3)(iii) of this subdivision (d). B can carry the $16x excess of the amount of credit allowed over the amount that may be taken to the succeeding seven years. The credit carryover is deemed to be composed of $6x of the UBT Paid Credit allowed with respect to AB and $10x of the UBT Paid Credit allowed with respect to BC. Example 7: Multiple tiers of partnerships and flow through of credits. Partnership C is a partner in Partnership B. B is a partner in partnership A. For each of the years 1995, 1996, 1997 and 1998, A's UBTI is $1000x, and A's tax liability is $40x, before a credit of $10x allowed to A pursuant to 11-503(i) (the REAP credit). The following chart summarizes the information relevant to A for the four taxable years. A1995199619971998UBTI$1000x$1000x$1000x$1000xTax after REAP credit$30x$30x$30x$30x For each year, B's distributive share from A is $400x. Its distributive share percentage with respect to A is 40%. In 1995 and 1996 B has separate UBTI of $200x. In 1997 B has separate UBTI loss of ($300x). In 1998 B has separate UBTI of $600x. The following chart summarizes the information relevant to B for the four taxable years: B1995199619971998Separate UBTI$200x$200x($300x)$600xDSP in A40%40%40%40%DS from A$400x$400x$400x$400xTotal UBTI$600x$600x$100x$1000xTax w/o UBT Paid Credit$24x$24x$4x$40x For each year, C's distributive share percentage in B is 50% and C has separate UBTI of $400x. The following chart summarizes the information relevant to C for the four taxable years: C1995199619971998Separate UBTI$400x$400x$400x$400xDSP in B50%50%50%50%DS from B$300x$300x$50x$500xTotal UBTI$700x$700x$450x$900xTax w/o UBT Paid Credit$28x$28x$18x$36x Calculation of the Credit for 1995: B's Credit: Measure 1: B's distributive share percentage of the sum of A's tax and applicable credits is $12x (B's distributive share percentage of 40% multiplied by A's tax liability after the REAP credit ($30x)). (Note: A's REAP credit is not added to A's tax liability in 1995 for purposes of this calculation. The effect of this is that B does not get the benefit of A's REAP credit in 1995. In 1996 and later years, B will get the benefit of A's REAP credit.) Measure 2: B's tax liability on its total UBTI of $600x would be $24x. The tax on B's separate UBTI of $200x would be $8x. Thus, the incremental tax effect on B's total UBTI of its distributive share of $400x from A is $16x ($24x - $8x). Therefore, B's UBT Paid Credit allowed is $12x. B's tax liability after the credit is $12x. C's Credit: Measure 1: C's distributive share percentage of the sum of B's tax and UBT Paid Credit is $12x (C's distributive share percentage of 50% multiplied by the sum of B's tax liability ($12x) and B's UBT Paid Credit with respect to A ($12x). Measure 2: C's tax liability on its total UBTI of $700x would be $28x. The tax on C's separate UBTI of $400x would be $16x. Thus, the incremental tax effect on C's total UBTI of its distributive share of $300x from B is $12x ($28x - $16x). Therefore, C's UBT Paid Credit allowed with respect to B is $12x. Calculation of the Credit for 1996: B's Credit: Measure 1: B's distributive share percentage of the sum of A's tax and applicable credits is $16x (B's distributive share percentage of 40% multiplied by the sum of A's tax liability and A's REAP credit ($40x)). (Note: the REAP credit is added here to A's tax liability for purposes of calculating B's credit. The effect of this is that A's REAP credit will flow through to B.) Measure 2: B's tax liability on its total UBTI of $600x would be $24x. The tax on B's separate UBTI of $200x would be $8x. Thus, the incremental tax effect on B's total UBTI of its distributive share of $400x from A is $16x ($24x - $8x). Therefore, B's UBT Paid Credit allowed is $16x. B's tax liability after the credit is $8x. C's Credit: Measure 1: C's distributive share percentage of the sum of B's tax and applicable credits is $12x (C's distributive share percentage of 50% multiplied by the sum of B's tax liability ($8x) and B's UBT Paid Credit with respect to A ($16x).) Measure 2: C's tax liability on its total UBTI of $700x would be $28x. The tax on C's separate UBTI of $400x would be $16x. Thus, the incremental tax effect on C's total UBTI of its distributive share of $300x from B is $12x ($28x - $16x). Therefore, C's UBT Paid Credit allowed with respect to B is $12x. Calculation of the Credit for 1997: B's Credit: Measure 1: B's distributive share percentage of the sum of A's tax and applicable credits is $16x (B's distributive share percentage of 40% multiplied by A's tax liability plus A's REAP credit ($40x)). Measure 2: B's separate loss is ignored and B's separate UBTI is treated as $0 on which there would be no tax. B's tax liability on its total modified UBTI of $400x would be $16x. Thus, the incremental tax effect on B's total modified UBTI of its distributive share of $400x from A is $16x ($16x - $0x). Therefore, B's UBT Paid Credit allowed for 1997 is $16x. However, because B's pre-credit tax liability is only $4x, B may only take a UBT Paid Credit of $4x in 1997. B may carry forward $12x, the excess of the $16x credit allowed over the $4x credit taken, to the next seven years subject to the applicable limitations. C's Credit: Measure 1: C's distributive share percentage of the sum of B's tax and applicable credits is $2x (C's distributive share percentage of 50% multiplied by B's tax liability ($0x) plus B's UBT Paid Credit taken ($4x)). (Note: for purposes of calculating C's UBT Paid Credit, only the credit taken by B is included, not the total credit allowed. See the discussion of C's credit for 1998 below in this example.) Measure 2: C's tax liability on its total UBTI of $450x would be $18x. The tax on C's separate UBTI of $400x would be $16x. Thus, the incremental tax effect on C's total UBTI of its distributive share of $50x from B is $2x ($18x - $16x). Therefore, C's UBT Paid Credit allowed with respect to B for 1997 is $2x. Calculation of the Credit for 1998: B's Credit: Measure 1: B's distributive share percentage of the sum of A's tax and applicable credits is $16x (B's distributive share percentage of 40% multiplied by A's tax liability plus A's REAP credit ($40x). Measure 2: B's tax liability on its total UBTI of $1000x would be $40x. The tax on B's separate UBTI of $600x would be $24x. Thus, the incremental tax effect on B's total UBTI of its distributive share of $400x from A is $16x ($40x - $24x). Therefore, B's UBT Paid Credit allowed for 1998 is $16x. It may also carry over to 1998 the excess credit allowed in 1997 of $12x that it could not take. Therefore, the total credit that is available to B in 1998 and that B may take is $28x. B's tax liability after the credit is $12x. C's Credit: Measure 1: C's distributive share percentage of the sum of B's tax and applicable credits is $20x (C's distributive share percentage of 50% multiplied by B's tax liability ($12x) plus B's UBT Paid Credit taken ($28x)). The credit taken includes the amount of $12x allowed to B in 1997 but carried forward and taken by B in 1998. Measure 2: C's tax liability on its total UBTI of $900x would be $36x. The tax on C's separate UBTI of $400x would be $16x. Thus, the incremental tax effect on C's total UBTI of its distributive share of $500x from B is $20x ($36x - $16x). Therefore, C's UBT Paid Credit allowed with respect to B for 1998 is $20x.
