§ 3-03.) Every taxpayer must pay the basic tax unless the alternative minimum tax is greater, in which case the taxpayer must pay the alternative minimum tax.
RCNY § 3-03
(ii)The basic tax is measured by the taxpayer's entire net income, or portion thereof allocated to New York City, and is imposed at the rate of nine percent.
(iii)The alternative minimum tax is the largest of three bases. (A) The bases are: (a) (1) except for a corporation organized under the laws of a country other than the United States, and except as provided in subparagraph (iii)(B) of this paragraph, 0.1 of the mill upon each dollar of taxable assets, or portion thereof allocated to New York City (See: 19 RCNY § 3-03(e) – Alternative minimum tax measured by taxable assets); or (2) 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) – 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) – Alternative minimum tax measured by alternative entire net income); and (c) $125 (See: 19 RCNY § 3-03(g) – Alternative minimum tax measured by the fixed minimum amount.) (B) 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) – Computation of the alternative minimum tax measured by taxable assets.) (2) Computing tax on combined returns. (Administrative Code, § 11-646(f)) Where corporations report on a combined basis, the tax is measured by the combined entire net income (See: 19 RCNY § 3-03(b)(6)), or by the combined alternative entire net income (See: 19 RCNY § 3-03(d)(2)), or by the combined taxable assets (See: 19 RCNY § 3-03(e)(6) of all of the corporations included in the combined return. Each taxpayer included in the combined return (other than the taxpayer paying the combined tax) is required to pay an alternative minimum tax of $125. The corporation paying the combined tax will pay the alternative minimum tax of $125 (See: 19 RCNY § 3-03(g)(2)) when it is the greatest alternative minimum base and the alternative minimum tax is greater than the basic tax. As to when combined returns will be required or permitted, see 19 RCNY § 3-05(b) – Combined returns.
(3)Correcting distortion of income or assets. (Administrative Code, § 11-646(g)) (i) In case it shall appear to the Commissioner of Finance that any agreement, understanding or arrangement exists between the taxpayer and any other corporation or any person or firm, whereby the activity, business, income or assets of the taxpayer within New York City is improperly or inaccurately reflected, the Commissioner of Finance may, in his discretion, make such adjustments as he deems necessary in order to accurately reflect the tax liability of the taxpayer. In exercising his discretion, the Commissioner of Finance is empowered to adjust: (A) items of income or deduction in computing entire net income or alternative entire net income; (B) assets; (C) wages, salaries and other personal service compensation, receipts or deposits in computing any allocation percentage, provided only that entire net income or alternative entire net income be adjusted accordingly and that any asset directly traceable to the elimination of any receipt be eliminated from taxable assets so as to accurately determine the tax. If, however, in the determination of the Commissioner of Finance, such adjustments do not or cannot effectively provide for the accurate determination of the tax, the Commissioner of Finance shall be authorized to require the filing of a combined return by the taxpayer and any such other corporations. Thus, the Commissioner of Finance is not required to exercise his authority under this paragraph and in lieu thereof or in addition thereto a combined return may be required or permitted pursuant to the provisions of 19 RCNY § 3-05(b).
(iv)In applying the provisions of subparagraph (i) of this paragraph, the Commissioner of Finance will consider, and may utilize in making adjustments or determining a fair price or fair profit, the principles and rules contained in §§ 1.482-1 and 1.482-2 of the Federal income tax regulations (26 C.F.R. § 1.482-1; 26 C.F.R. § 1.482-2) to the extent that they are relevant and can be made applicable to the provisions of this paragraph.
(4)Use of dollar amounts in computing tax.
(i)Any amount required to be included in a return may be entered at the nearest whole dollar amount. This does not apply to the items which must be taken into account in making the computations necessary to determine such amount. For example, each taxable dividend received must be taken into account at its exact amount, including cents, in computing the amount of dividend income to be included in the banking corporation tax return. However, the total amount of dividend income to be included in the return may be entered at the nearest whole dollar amount. A taxpayer may elect not to use whole dollar amounts by reporting all amounts in full, including cents, if a similar election is made for Federal income tax purposes. Such election must be made at the time of filing the return and is irrevocable with respect to the taxable year covered by the return. A new election may be made on any return for any subsequent taxable year.
(1)General. (Administrative Code, § 11-643.5(a)) (i) The basic tax is measured by entire net income, or the portion thereof allocated to New York City, and is the measure of the tax unless the computation of the alternative minimum tax produces a greater amount of tax. The basic tax is computed by multiplying entire net income, or the portion thereof allocated to New York City, by the tax rate of nine percent.
(2)Definition of entire net income. (Administrative Code, § 11-641(a)) (i) The term "entire net income" means total net income from all sources, which is the same as the taxable income which the taxpayer is required to report to the United States Treasury Department for purposes of the Federal income tax imposed by chapter one of the Internal Revenue Code with the adjustments required by paragraphs (3), (4) and (5) of this subdivision.
(v)The income actually reported or the income actually determined for Federal income tax purposes is not necessarily the same as the taxable income which should have been reported for Federal income tax purposes under the provisions of the Internal Revenue Code. Generally the determination of the Commissioner of Internal Revenue as to Federal taxable income is followed, but it is not binding on the Commissioner of Finance.
(vi)For purposes of Subchapter 3 of Chapter 6 of Title 11 of the Administrative Code, any election pursuant to § 338(h)(10) of the Internal Revenue Code made with respect to a target corporation that is an S corporation for Federal tax purposes will be deemed to be an invalid election and will not be recognized for purposes of such subchapter. If pursuant to this subparagraph, a § 338(h)(10) election of an S corporation is not recognized, the corresponding election pursuant to § 338(g) will be deemed invalid and will not be recognized for purposes of Subchapter 3 of Chapter 6 of Title 11 of the Administrative Code. See Treas. Reg. § 1.338(h)(10)-1(c)(4). The basis of the assets of the target corporation will be determined without regard to any adjustments made pursuant to § 338(b).
(5)Other items affecting entire net income. (Administrative Code, § 11-641) (i) Entire net income may be affected by the following: (A) In the case of property placed in service prior to January 1, 1973 for which the taxpayer properly adopted a method of computing depreciation under §§ 11-621 or 11-629 of the Administrative Code which was different than the method adopted for Federal income tax purposes, entire net income shall be computed by adding to Federal taxable income the deduction for depreciation on such property used in the computation of Federal taxable income and by subtracting from Federal taxable income a deduction for depreciation on such property computed as if such deduction were determined by the method of depreciation adopted under §§ 11-621 or 11-629 of the Administrative Code. (B) A deduction is allowed for depreciation, at the election of the taxpayer, for certain tangible property located in New York City. (See: 19 RCNY § 3-04(h)(5) – Optional depreciation.) (C) Provided an election has not been made pursuant to 19 RCNY § 3-04(b)(3), a deduction is allowed for the adjusted eligible net income, as described in 19 RCNY § 3-03(c), of the IBF of the taxpayer. In the event adjusted eligible net income is a loss, the amount of such loss is added to entire net income. (D) Entire net income is to be computed without regard to the reduction in the basis of property that is required by § 362 of the Internal Revenue Code because of any amount of money or other property received from the Federal Deposit Insurance Corporation pursuant to § 13(c) of the Federal Deposit Insurance Act, as amended, (12 U.S.C. § 1823(c)) or from the Federal Savings and Loan Insurance Corporation pursuant to § 406(f)(1), (2), (3) or (4) of the Federal National Housing Act, as amended, (12 U.S.C. § 1729(f)(1), (2), (3) or (4)).
(6)Computation of entire net income on a combined return. (Administrative Code, § 11-646(f)) (i) Each corporation included in the combined return is to compute its entire net income as if it had filed its Federal income tax return on a separate basis. Then, to compute combined entire net income, all intercorporate dividends and intercorporate transactions between the corporations included in the combined return must be eliminated. In applying the foregoing, intercorporate profits are deferred, capital losses are to be offset against capital gains and contributions are to be deducted as if the corporations in the group had filed a consolidated Federal income tax return.
(7)Taxable year in which income or deduction is included in entire net income. (Administrative Code, § 11-641(m)) In general, the method of accounting used in computing taxable income for Federal income tax purposes is the method used in computing entire net income. However, when the Commissioner of Finance deems it necessary in order to properly reflect the entire net income of the taxpayer, it may determine the taxable year or period in which any item of income or deduction shall be included without regard to the method of accounting used by the taxpayer for Federal income tax purposes.
(8)Adjusting entire net income to period covered by return. (Tax Law, § 11-641(i)) (i) If the entire net income required to be reported under the banking corporation tax law is for a period different than the period covered by the taxpayer's Federal income tax return, the taxpayer's entire net income must be prorated to correspond with the period covered by the return under the banking corporation tax law. The prorated entire net income is computed as follows: (A) adjust Federal taxable income in the manner set forth in paragraphs (3), (4) and (5) of this subdivision; (B) divide entire net income by the number of calendar months, or major parts thereof, covered by the return for Federal income tax purposes; and (C) multiply the result by the number of calendar months, or major parts thereof, covered by the return under the banking corporation tax law. Example: A banking corporation organized in France has been doing business since 1973 in the United States and began to do business in New York City on May 10, 1985, and reports on a calendar year basis. Its entire net income for calendar year 1985 is $12,000. For purposes of computing the tax measured by entire net income for taxable year 1985, entire net income must be divided by 12 and the result multiplied by 8 (the number of months from May to December), resulting in a prorated entire net income of $8,000.
(9)Correcting distortion of entire net income. (Administrative Code, § 11-646(g)) For rules relating to the power of the Commissioner of Finance to correct distortion of entire net income, see 19 RCNY § 3-03(a)(3).
(c)International banking facility (IBF).
(b)The classification of items as assets or liabilities must be on a consistent basis from year to year and determined according to U.S. tax principles.
(d)The average total value of assets and the average total amount of liabilities is determined by using the same interval (daily, weekly, etc.) actually used for Federal income tax purposes.
(e)A particular asset value or liability amount that is denominated in one currency is translated into another currency at the exchange rate for the date the value or amount is determined for purposes of this subparagraph. An interest expense amount shown on the books is translated at the exchange rate from a qualified source for the date the amount is paid or accrued. Qualified sources of exchange rates must be determined under the rules of § 1.964-1(d)(5) of the Federal income tax regulations (26 C.F.R. § 1.964-1(d)(5)). (B) The asset determination in Step 1 of the Federal three-step process is the average total value of all of the IBF assets (including interoffice) shown on the books that generate, have generated, or could reasonably have been or be expected to generate income, gain or loss which is or would be included in the computation of entire net income for the taxable year, or portion thereof. (C) The liability determination in Step 2 of the Federal three-step process is the amount of IBF-connected liabilities for the taxable year, or portion thereof, determined by multiplying the average total value of assets determined in subparagraph (iii)(B) of this paragraph, by the same percentage actually used for Federal income tax purposes for the taxable year. (D) If the taxpayer used, for Federal income tax purposes, the separate currency pools method in Step 3 of the Federal three-step process, the IBF interest expense for New York City tax purposes is the sum of the separate interest expenses for each currency in which the IBF has borrowed. If the IBF borrowed in a currency for which it did not compute an interest expense for Federal income tax purposes, it must compute its IBF interest expense for that currency as if it actually had an interest expense for such currency for Federal income tax purposes. The interest expense for each currency is determined as follows: (a) the amount of IBF-connected liabilities determined in subparagraph (iii)(C) of this paragraph multiplied by; (b) the ratio, stated in the same currency used for Federal income tax purposes, of (1) the average total amount of IBF liabilities denominated in the particular currency shown on the books (including interoffice) for the taxable year, or portion thereof, to (2) the average total amount of all IBF liabilities shown on the books (including interoffice) for the taxable year, or portion thereof, multiplied by; (c) the average worldwide interest rate actually used for Federal income tax purposes in computing that particular currency. (E) If the taxpayer used, for Federal income tax purposes, the branch book/dollar pool method in Step 3 of the Federal three-step process and Section 1.882-5(b)(3)(i)(A) of the Federal income tax regulations (26 C.F.R. § 1.882-5(b)(3)(i)(A)) applied, the IBF interest expense for New York City tax purposes is determined by multiplying the IBF-connected liabilities, determined in subparagraph (iii)(C) of this paragraph, by the same average U.S.-connected interest rate actually used for Federal income tax purposes. (F) If the taxpayer used, for Federal income tax purposes, the branch book/dollar pool method in Step 3 of the Federal three-step process and § 1.882-5(b)(3)(i)(B) of the Federal income tax regulations (26 C.F.R. § 1.882-5(b)(3)(i)(B)) applied and the IBF-connected liabilities exceed the average total amount of IBF liabilities shown on the books (excluding interoffice), the IBF interest expense for New York City tax purposes is determined by adding: (a) the amount of IBF interest expense (stated in U.S. dollars) shown on the books (excluding interoffice) for the taxable year, or portion thereof; and (b) the amount determined by multiplying the excess of IBF-connected liabilities, determined in subparagraph (iii)(C) of this paragraph, over the average total amount of IBF liabilities (stated in U.S. dollars) shown on the books (excluding interoffice) for the taxable year, or portion thereof, by the average interest rate on U.S. dollar liabilities actually used for Federal income tax purposes. (G) If the taxpayer used, for Federal income tax purposes, the branch book/dollar pool method in Step 3 of the Federal three-step process and § 1.882-5(b)(3)(i)(B) of the Federal income tax regulations (26 C.F.R. § 1.882-5(b)(3)(i)(B)) applied and the IBF-connected liabilities do not exceed the average total amount of IBF liabilities shown on the books (excluding interoffice), the IBF interest expense for New York City tax purposes is determined by subtracting: (a) the amount determined by multiplying the difference between the average total amount of IBF liabilities (stated in U.S. dollars) shown on the books (excluding interoffice) for the taxable year, or portion thereof, and the IBF-connected liabilities, determined in subparagraph (iii)(C) of this paragraph, by the average interest rate on U.S. dollar liabilities actually used for Federal income tax purposes, from; (b) the amount of IBF interest expense (stated in U.S. dollars) shown on the books (excluding interoffice) for the taxable year, or portion thereof. If the amount determined in this paragraph results in a negative amount, the taxpayer must determine the interest expense of the IBF for New York City tax purposes by multiplying the IBF-connected liabilities, determined in subparagraph (iii)(C) of this paragraph, by the average IBF-connected interest rate. The average IBF-connected interest rate is the ratio, stated in U.S. dollars, of the total amount of IBF interest expense shown on the books (excluding interoffice) for the taxable year, or portion thereof, to the average total amount of IBF liabilities shown on the books (excluding interoffice) for the taxable year, or portion thereof.
(10)Ineligible funding amount. (Administrative Code, § 11-641(f)(5)) (i) The ineligible funding amount of the IBF is determined by multiplying eligible net income (See: 19 RCNY § 3-03(c)(3)(i)), by the following fraction: (A) The numerator of the fraction is the average aggregate amount of all liabilities and other sources of funds of the IBF for the taxable year which were not owed to or received from foreign persons (the term "foreign person" is defined in 19 RCNY § 3-03(c)(2)(viii)). (B) The denominator of the fraction is the average aggregate amount of all liabilities and other sources of funds of the IBF for the taxable year.
(11)Floor amount. (Administrative Code, § 11-641(f)(b)) (i) The floor amount is computed by multiplying the amount remaining, after reducing eligible net income (See: 19 RCNY § 3-03(c)(3)(i)) by the ineligible funding amount (See: 19 RCNY § 3-03(c)(10)(i)) by a fraction not greater than one. The fraction is determined as follows: (A) The numerator is the amount determined in subparagraph (i)(A)(a) of this paragraph multiplied by the applicable percentage stated in subparagraph (i)(A)(b) of this paragraph minus the amount determined in subparagraph (i)(A)(c) of this paragraph.
(a)Determine the average aggregate amount of loans and deposits as described in subparagraph (ii) of this paragraph which were properly recorded in the financial accounts of the taxpayer's branches, agencies and offices within New York State for taxable years beginning in 1975, 1976 and 1977. Loans and deposits related to net income reassigned to New York State by the New York State Tax Commission are not includible for purposes of this subparagraph (i)(A)(a). The average aggregate amount of such loans and deposits may be determined by reference to the monthly or quarterly reports of the taxpayer to the Federal Reserve Bank of New York, as appropriately modified.
(f)Alternative minimum tax measured by issued capital stock.
(g)Alternative minimum tax measured by the fixed minimum amount.
