§ 3-01 Imposition of Tax.
RCNY § 3-01
(a)Introduction.
(1)Nature of tax. (Administrative Code, § 11-639(a); § 11-646(f)) Part 4 of Subchapter 3 of Chapter 6 of Title 11 of the Administrative Code of the City of New York (referred to hereinafter in these regulations as the "banking corporation tax law") imposes a tax on every banking corporation, as defined in 19 RCNY § 3-01(b), for the privilege of doing business in New York City in a corporate or organized capacity for all or any part of each of its fiscal or calendar years. (See: 19 RCNY § 3-01(c) – Corporations subject to tax.) Also, certain corporations, including bank holding companies, are required or in the discretion of the Commissioner of Finance may be required or permitted to make a combined return with related corporations taxable under the banking corporation tax law. (See: 19 RCNY § 3-05(b) of these regulations – Combined returns.) (2) Amount of tax. (Administrative Code, § 11-641; § 11-643.5) (i) The banking corporation tax law imposes a tax which is the greater of the "basic tax" or the "alternative minimum tax." The basic tax is measured by "entire net income," which is the same as the Federal taxable income which the taxpayer is required to report to the United States Treasury Department, with certain adjustments, and is imposed at the rate of nine percent on entire net income, or portion thereof allocated to New York City. (See: 19 RCNY § 3-03(b) of these regulations – Basic tax – measured by entire net income.) The alternative minimum tax is measured by the greatest of three bases and is the tax when such alternative minimum tax results in a tax greater than the basic tax. The bases for computing the alternative minimum tax are: (A) (a) except for a corporation organized under the laws of a country other than the United States, and except as provided in subparagraph (ii) of this paragraph, 0.1 of a mill upon each dollar of taxable assets, or portion thereof allocated to New York City (See: 19 RCNY § 3-03(e) of these regulations – Alternative minimum tax measured by taxable assets); or (b) for a corporation organized under the laws of a country other than the United States, 2.6 mills upon each dollar of the taxpayer's issued capital stock or portion thereof allocated to New York City, on the last day of its taxable year (See: 19 RCNY § 3-03(f) of these regulations – Alternative minimum tax measured by issued capital stock); (B) three percent of alternative entire net income, or portion thereof allocated to New York City. (See: 19 RCNY § 3-03(d) of these regulations – Alternative minimum tax measured by alternative entire net income.); and (C) $125 (See: 19 RCNY § 3-03(g) of these regulations – Alternative minimum tax measured by the fixed minimum amount.) (ii) A taxpayer which has an outstanding net worth certificate issued to the Federal Deposit Insurance Corporation or to the Federal Savings and Loan Insurance Corporation and which meets certain other requirements is not subject to the alternative minimum tax measured by taxable assets for that portion of the taxable year in which such certificate is outstanding and such requirements are met. (See: 19 RCNY § 3-03(e)(1) of these regulations – Computation of the alternative minimum tax measured by taxable assets.) (b) Definitions. General. Generally, any term used in these regulations, unless defined specifically herein or a different meaning is clearly required, shall have the same meaning as when used in a comparable context in: (i) the laws of the United States relating to Federal income taxes and the Federal income tax regulations promulgated thereunder, or (ii) Subchapter 5 of Chapter 6 of Title 11 of the Administrative Code and the regulations promulgated thereunder. Any reference herein to the laws of the United States shall mean the provisions of the Internal Revenue Code, and amendments thereto, and other provisions of the laws of the United States relating to Federal income taxes, as the same are effective for the taxable year. Automated teller machine.
(i)The term "automated teller machine" means an electronic device, either on-line or off-line, that is not manned, except as provided in subparagraph (ii) of this definition, and which permits one or more of the following: (A) deposits; (B) withdrawals; (C) transfers of funds from one account to another; (D) loan repayments; (E) disbursements of funds pursuant to prearranged lines of credit; or (F) balance inquiries.
(ii)An electronic device may be manned by employees of the bank for the following purposes: (A) to demonstrate equipment; (B) to provide information; (C) to repair and service the electronic equipment; or (D) to act as security guards. Bank. The term "bank" means a banking corporation as defined in subparagraph (i), (ii), (iii), (iv), (v), (vi), (vii), or (ix) of 19 RCNY § 3-01(b) "Banking Corporation." Bank holding company. (Administrative Code, § 11-646(f)(1)). The term "bank holding company" means any corporation subject to Article 3-A of the New York State Banking Law, or registered under the Federal Bank Holding Company Act of 1956, as amended, or registered as a savings and loan holding company (but excluding a diversified savings and loan holding company) under the Federal National Housing Act, as amended. For purposes of these regulations the term "bank holding company" does not include a bank. Banking business. (Administrative Code, § 11-640(b)) (i) The term "banking business" means the business a corporation may be created to do under Article 3 (Banks and Trust Companies), Article 3-B (Subsidiary Trust Companies), Article 5 (Foreign Banking Corporations and National Banks), Article 5-A (New York Business Development Corporation), Article 6 (Savings Banks) or Article 10 (Savings and Loan Associations) of the New York State Banking Law or the business a corporation is authorized to do by such article. With respect to a national banking association, Federal savings bank, Federal savings and loan association or production credit association, the term "banking business" means the business a national banking association, Federal savings bank, Federal savings and loan association or production credit association may be created to do under the laws of the United States or the business a national banking association, Federal savings bank, Federal savings and loan association or production credit association is authorized to do by the laws of the United States or the laws of New York State.
(iii)Every corporation organized under the laws of any other country which is doing a banking business is a banking corporation. Banking corporations organized in any other country include commercial banks and trust companies.
(iv)Every national banking association organized under the authority of the United States which is doing a banking business is a banking corporation.
(v)Every Federal savings bank which is doing a banking business is a banking corporation.
(vi)Every Federal savings and loan association which is doing a banking business is a banking corporation.
(vii)Every production credit association created under the Federal Farm Credit Act of 1933, all of whose stock held by the Federal Production Credit Corporation has been retired, which is doing a banking business is a banking corporation.
(viii)The Mortgage Facilities Corporation created by Chapter 564 of the Laws of 1956 of New York State is a banking corporation.
(ix)Every other corporation organized under the authority of the United States, including an Edge Act Corporation organized under § 25(a) of the Federal Reserve Act, which is doing a banking business is a banking corporation.
(x)(A) (a) Any corporation whose voting stock is 65 percent or more owned or controlled, directly or indirectly, by a bank holding company or by a corporation described in any of the foregoing subparagraphs of this definition is a banking corporation if the requirements set forth in this subparagraph (x)(A)(a) are met. The corporation whose voting stock is so owned or controlled must be principally engaged in a business which: (1) might be lawfully conducted by a corporation subject to Article 3 of the New York State Banking Law or by a national banking association, or (2) is so closely related to banking or managing or controlling banks as to be a proper incident thereto, as set forth in paragraph (8) of subsection (c) of Section (4) of the Federal Bank Holding Company Act of 1956, as amended (12 U.S.C. § 1843(c)(8)).
(b)For purposes of subparagraph (x)(A)(a) of this definition, the phrase "business which might be lawfully conducted" means the nature of business, regardless of where such business is conducted, that a corporation organized pursuant to Article 3 of the New York State Banking Law or a national banking association having its principal office in New York State may conduct: (1) without the need for a specific grant of authorization by the appropriate regulatory authorities or (2) with a specific grant of authorization if such corporation or association has in fact received such authorization from the appropriate regulatory authority.
(c)The test of ownership for purposes of this subparagraph (x)(A) is actual beneficial ownership rather than mere record title as shown by the stock books of the issuing corporation. A corporation may be the actual beneficial owner of voting stock of another corporation even though it has conferred the right to vote such stock on others, by means of a proxy, voting trust or otherwise. The term "control" for purposes of this subparagraph (x)(A) refers to all cases where one corporation directly or indirectly possesses the power to dictate or influence the management and policies of another corporation, whether through the ownership of the voting stock of such corporation or the ownership of the voting stock of another corporation which possesses that power. The decision as to whether or not a corporation is controlled by another corporation will be determined by the facts in each case. Example: Corporation X owns 60 percent of the voting stock of Corporation Y. The remaining stock of Corporation Y is owned by three employees of Corporation X. These employees have agreed in writing to sell their stock to Corporation X when they leave the corporation. As part of the agreement, the employees have given Corporation X their voting proxy. Corporation X owns or controls 65 percent or more of the voting stock of Corporation Y.
(d)The provision of this subparagraph (x)(A) are illustrated in the following examples. Example 1: A federal bank holding company doing business in New York City own 100% of the voting stock of Bank A and 60% of Bank B. The bank holding company also owns 100% of the voting stock of Corporation C. Corporation C owns 70% of the voting stock of Corporation D. Bank A owns 80% of the voting stock of Corporation E. Bank B owns 100% of the voting stock of Corporation F. Corporation E owns 70% of the voting stock of Corporation G and Corporation F owns 30% of the voting stock of Corporation G. This can be diagrammed as follows: Both Banks A and B are commercial banks organized under the laws of New York State and subject to Article 3 of the New York State Banking Law. Corporations D, E and F are principally engaged in New York City in a business which might be lawfully conducted by Bank A or B. Corporation G is principally engaged in New Jersey in a business which might be lawfully conducted by Bank A or B. Corporation C is not principally engaged in a business which might be lawfully conducted by Bank A or B or by a national banking association or is so closely related to banking or managing or controlling banks as to be a proper incident thereto, as set forth in Section 4(c)(8) of the Federal Bank Holding Company Act of 1956. The bank holding company owns or controls, directly or indirectly: 100% of Bank A60% of Bank B 100% of Corporation C 70% of Corporation D (100% of C x 70% of D) 80% of Corporation E (100% of A x 80% of E) 60% of Corporation F (60% of B 0 100% of F) 74% of Corporation G (100% of A x 80% of E x 70% of G) (60% of B x 100% of F x 30% of G) Banks A and B are banking corporations because they are commercial banks organized under the laws of New York State. Corporations D, E and G are banking corporations because 65% or more of their voting stock is owned or controlled, directly or indirectly by the bank holding company and they are principally engaged in a business which might be lawfully conducted by a corporation subject to Article 3 of the New York State Banking Law. Although the bank holding company owns 100% of the voting stock of Corporation C, it is not a banking corporation because it is not principally engaged in a business which might be lawfully conducted by a corporation subject to Article 3 of the New York State Banking Law or by a national banking association or which is so closely related to banking or managing or controlling banks as to be a proper incident thereto, as set forth in Section 4(c)(8) of the Federal Bank Holding Company Act of 1956. Corporation F is a banking corporation because Bank B owns 100% of its voting stock and it is principally engaged in a business which might be lawfully conducted by a corporation subject to Article 3 of the New York State Banking Law. Example 2: A savings and loan holding company registered under the Federal National Housing Act owns 100% of the voting stock of Corporation L, 80% of the voting stock of Corporation M and 100% of the voting stock of Savings and Loan Association N. This can be diagrammed as follows: Corporation L is principally engaged in a business which might be lawfully conducted by a corporation subject to Article 3 of the New York State Banking Law and is therefore a banking corporation. Corporation M is principally engaged in a business which might be lawfully conducted by a savings bank but is not a business which might be lawfully conducted by a corporation subject to Article 3 of the New York State Banking Law or by a national banking association or is so closely related to banking or managing or controlling banks as to be a proper incident thereto, as set forth in Section 4(c)(8) of the Federal Bank Holding Company Act of 1956. Accordingly, Corporation M is not a banking corporation. (B) Any corporation described in subparagraph (x)(A) of this definition which was subject to the tax imposed by Subchapter 2 of Chapter 6 of Title 11 of the Administrative Code (the general corporation tax) for its taxable year ending during 1984 may, on or before the due date for filing its return (determined with regard to extensions of time for filing) for its taxable year ending during 1985, make a one-time election to continue to be taxable under Subchapter 2. Such election shall continue to be in effect until revoked by the taxpayer. In no event shall such election or revocation be for a part of a taxable year. The election is made by the filing of a tax return pursuant to Subchapter 2 of Chapter 6 of Title 11 of the Administrative Code, and the revocation is made by the filing of a return pursuant to such Code. (C) For purposes of this subparagraph, the phrase "principally engaged in a business" means that a corporation derives more than 50 percent of its gross receipts from such business during its taxable year for Federal income tax purposes. Gross receipts from various aspects of a corporation's business may be aggregated to determine what business the corporation is principally engaged in. For example, Corporation P derives 40 percent of its gross receipts from a business which might be lawfully conducted by a corporation subject to Article 3 of the New York State Banking Law, 40 percent of its gross receipts from a business which is so closely related to banking or managing or controlling banks as to be a proper incident thereto and 20 percent of its gross receipts from a business which may not be lawfully conducted by a corporation subject to Article 3 of the New York State Banking Law and is not so closely related to banking or managing or controlling banks as to be a proper incident thereto. Since corporation P derives more than 50 percent of its total gross receipts from a business which might be lawfully conducted by a corporation subject to Article 3 of the New York State Banking Law or is so closely related to banking or managing or controlling banks as to be a proper incident thereto, the "principally engaged in a business" requirement set forth in subparagraph (x)(A)(a) of this definition is met. Bona fide office.
(2)Corporations organized in other states or countries. (Administrative Code, § 11-639; § 11-640) The tax is imposed on every banking corporation organized under the laws of any other state or country for the privilege of doing business in a corporate or organized capacity in New York City.
(3)Corporations organized under the laws of the United States. (Administrative Code, § 11-639; § 11-640) The tax is imposed on every banking corporation organized under the laws of the United States for the privilege of doing business in a corporate or organized capacity in New York City.
(4)Taxability of bank holding companies. (Administrative Code, § 11-639; § 11-646(f)) The tax is imposed on every bank holding company organized under the laws of New York State which is included in a combined return pursuant to 19 RCNY § 3-05(b) for the privilege of doing business in a corporate or organized capacity in New York City. The tax is imposed on every other bank holding company which is included in a combined return pursuant to 19 RCNY § 3-05(b) for the privilege of doing business in a corporate or organized capacity in New York City.
(5)Change in classification. (Administrative Code, § 11-639; § 11-640(d)) (i) A corporation subject to the banking corporation tax under Part 4 of Subchapter 3 of Chapter 6 of Title 11 of the Administrative Code may, by reason of a change in the nature of its activities or a change in the ownership or control of its voting stock, cease to be subject to such tax and become taxable under another part of Chapter 6 of Title 11 or another chapter of Title 11. Conversely, a corporation subject to tax under another part of Chapter 6 of Title 11 or another chapter of Title 11 may, for the same reason, cease to be taxable thereunder and become subject to the banking corporation tax. The date on which any such change of classification becomes effective will be determined by the facts of each case.
(6)Banking corporations exempt from tax. (Administrative Code, § 11-640(c)) Any trust company all of whose capital stock is owned by 20 or more savings banks organized under New York State law is exempt from the banking corporation tax.
