§ 11-508 Allocation to the city.
AC § 11-508
(a)General; allocation of business income. If an unincorporated business is carried on both within and without the city, as determined under regulations of the commissioner of finance, there shall be allocated to the city, in the manner provided in subdivision (b), (c) or (d) of this section, a fair and equitable portion of its business income. For taxable years beginning before July first, nineteen hundred ninety-six, if the unincorporated business has no regular place of business outside the city, all of such business income shall be allocated to the city.
(b)(1) Allocation by taxpayer's books. For taxable years beginning before January first, two thousand five, the portion allocable to the city may be determined from the books of the business if the methods used in keeping such books are approved by the commissioner of finance as fairly and equitably reflecting the income from the city.
(2)(i) If a taxpayer determines the portion of business income to be allocated to the city using the method prescribed in paragraph one of this subdivision on a timely filed original return with respect to each of the two taxable years, each of which must consist of twelve months, immediately preceding the taxpayer's first taxable year beginning on or after January first, two thousand five, the taxpayer may make a one-time election to continue to use that method for taxable years beginning on or after January first, two thousand five and before January first, two thousand twelve. Such election shall be made by using the method prescribed in paragraph one of this subdivision on an original timely filed return with respect to the first taxable year beginning on or after January first, two thousand five and before January first, two thousand six. Such election may not be made, or if made, shall be deemed revoked as of the beginning of the taxable year if, for either of the two taxable years immediately preceding the year in which the election is made, the commissioner of finance has determined the methods used in keeping such books do not fairly and equitably reflect the income from the city.
(ii)(A) A taxpayer that has made the election provided for in subparagraph (i) of this paragraph may revoke it by filing an original or amended return using an allocation method permitted by this section other than the method prescribed in paragraph one of this subdivision unless the commissioner of finance has determined that such method does not fairly and equitably reflect the income from the city. (B) The election provided for in subparagraph (i) of this paragraph shall be deemed to have been revoked as of the beginning of the taxable year if, for any taxable year during which the election is intended to be in effect, the commissioner of finance has determined that the methods used in keeping the taxpayer's books do not fairly and equitably reflect the income from the city. (C) In the case of a taxpayer that is a partnership or other unincorporated entity, the election provided for in subparagraph (i) of this paragraph shall be deemed to have been revoked as of the beginning of the taxable year unless one or more of the persons having a proportionate interest or interests, amounting to more than fifty percent of all such interests, in the taxpayer's unincorporated business gross income and unincorporated business deductions for such taxable year were persons having a proportionate interest or interests, amounting to more than fifty percent of all such interests, in the taxpayer's unincorporated business gross income and unincorporated business deductions at the end of the taxpayer's last taxable year beginning before January first, two thousand five. For purposes of this clause, a transfer of an ownership interest in unincorporated business gross income or unincorporated business deductions upon the death of a partner or owner to such deceased partner's or owner's estate shall be disregarded but transfers by such decedent's estate shall not be disregarded. (D) Once the election provided for in subparagraph (i) of this paragraph has been revoked by the taxpayer pursuant to clause (A) or deemed revoked pursuant to clauses (B) or (C) of this subparagraph, the taxpayer shall be barred from using the method prescribed in paragraph one of this subdivision for the taxable year in which the election has been revoked or deemed revoked and any subsequent taxable year.
(c)Allocation by formula. If subdivision (b) does not apply to the taxpayer, the portion allocable to the city shall be determined by multiplying (A) the business income by (B) a business allocation percentage to be determined by adding together the percentages computed under paragraphs one, two and three of this subdivision, and dividing the result by the number of percentages; provided, however, that for taxable years beginning on or after July first, nineteen hundred ninety-six, a taxpayer that is a "manufacturing business," as defined in subdivision (g) of this section, may determine its business allocation percentage as provided in such subdivision (g): (1) Property percentage. The percentage computed by dividing (A) the average of the value, at the beginning and end of the taxable year, of real and tangible personal property connected with the unincorporated business and located within the city, by (B) the average of the value, at the beginning and end of the taxable year, of all real and tangible personal property connected with the unincorporated business and located both within and without the city. For this purpose, for taxable years beginning before January first, two thousand five, real property shall include real property rented to the unincorporated business and, for this purpose, for taxable years beginning on and after January first, two thousand five, real and tangible personal property shall include real and tangible personal property rented to the unincorporated business and the value of such real and tangible personal property rented to the unincorporated business shall mean the product of (i) eight and (ii) the gross rents payable for the rental of such property during the taxable year.
(3)Gross income percentage. The percentage computed by dividing (A) the gross sales or charges for services performed by or through an agency located within the city, by (B) the total of all gross sales or charges for services performed within and without the city. The sales or charges to be allocated to the city shall include all sales negotiated or consummated, and charges for services performed, by an employee, agent, agency or independent contractor chiefly situated at, connected by contract or otherwise with, or sent out from, offices of the unincorporated business, or other agencies, situated within the city; provided, however, that for taxable years beginning on or after July first, nineteen hundred ninety-six, sales of tangible personal property shall not be allocated to the city as hereinabove in this paragraph provided, but shall be allocated to the city only where shipments are made to points within the city, and provided, further, that: (A) for taxable years beginning on or after July first, two thousand five, for taxpayers having gross receipts for the taxable year (determined without regard to any deductions) of less than one hundred thousand dollars, charges for services performed shall be allocated to the city to the extent that the services are performed within the city; (B) for taxable years beginning on or after July first, two thousand six, for taxpayers having gross receipts for the taxable year (determined without regard to any deductions) of less than three hundred thousand dollars, charges for services performed shall be allocated to the city to the extent that the services are performed within the city; and (C) for taxable years beginning on or after July first, two thousand seven, for all other taxpayers, charges for services performed shall be allocated to the city to the extent that the services are performed within the city.
(d)Other allocation methods. The portion allocable to the city shall be determined in accordance with rules and regulations of the commissioner of finance if it shall appear to the commissioner of finance that the income from the city is not fairly and equitably reflected under the provisions of either subdivision (b) or subdivision (c) of this section.
(e)Special rules for real estate. Income and deductions from the rental of real property, and gain and loss from the sale, exchange or other disposition of real property, shall not be subject to allocation under subdivision (b), (c), or (d) of this section, but shall be considered as entirely derived from or connected with the state, other than this state, in which such property is located or, if such property is located in this state, the political subdivision thereof. To the extent that anything in the preceding sentence is inconsistent with any provision of subdivision (d) of section 11-502, subdivision (c) of section 11-506 or subdivision sixteen of section 11-507 of this chapter, the provisions of such subdivisions shall take precedence over the provisions of the preceding sentence.
(e-1)Special rules for publishers and broadcasters.
(1)Notwithstanding anything in paragraph three of subdivision (c) of this section to the contrary and except as provided in paragraph four of this subdivision, in the case of a taxpayer engaged in the business of publishing newspapers or periodicals, there shall be allocated to the city, for purposes of such paragraph three, the gross sales or charges for services arising from sales of subscriptions to, and advertising contained in, such newspapers or periodicals, to the extent that such newspapers or periodicals are delivered to points within the city.
(4)Notwithstanding anything in paragraph one or two of this subdivision to the contrary, for taxable years beginning on or after January first, two thousand two, in the case of a taxpayer engaged in the business of publishing newspapers or periodicals, or broadcasting radio or television programs, whether through the public airwaves or by cable, direct or indirect satellite transmission, or any other means of transmission, there shall be allocated to the city, for purposes of paragraph three of subdivision (c) of this section, the gross sales or charges to subscribers located in the city for subscriptions to such newspapers, periodicals, or program services. For purposes of this paragraph, a subscriber shall be deemed located in the city if, in the case of newspapers and periodicals, the mailing address for the subscription is within the city and, in the case of program services, the billing address for the subscription is within the city. For purposes of this clause, "subscriber" shall mean a member of the general public who receives such newspapers, periodicals or program services and does not further distribute them.
(e-2)Rules for receipts from certain services to investment companies.
(e-3)Rules for receipts for services performed by registered securities or commodities brokers or dealers.
(iii)The term "primary spread" means the difference between the price paid by the taxpayer to the issuer of the securities being marketed and the price received from the subsequent sale of the underwritten securities at the initial public offering price, less any selling concession and any fees paid to the taxpayer for advisory services or any manager's fees, if such fees are not paid by the customer to the taxpayer separately. The term "public offering price" means the price agreed upon by the taxpayer and the issuer at which the securities are to be offered to the public. The term "selling concession" means the amount paid to the taxpayer for participating in the underwriting of a security where the taxpayer is not the lead underwriter. (E) Receipts constituting interest earned by the taxpayer on loans and advances made by the taxpayer to an entity affiliated with the taxpayer shall be deemed to arise from services performed at the principal place of business of such affiliated entity. For purposes of this subparagraph, an entity shall be considered affiliated with the taxpayer if such entity and the taxpayer have eighty percent or more common direct or indirect, actual or beneficial ownership. (F) Receipts constituting account maintenance fees shall be deemed to arise from services performed at the mailing address in the records of the taxpayer of the customer who is responsible for paying such account maintenance fees. (G) Receipts constituting fees for management or advisory services, including fees for advisory services in relation to merger or acquisition activities, but excluding fees paid for services described in paragraph one of subdivision (e-2) of this section, shall be deemed to arise from services performed at the mailing address in the records of the taxpayer of the customer who is responsible for paying such fees.
(f)Allocation of investment income.
(h)Notwithstanding subdivision (d) of this section, if it shall appear to the commissioner of finance that any business or investment allocation percentage determined as hereinabove provided does not properly reflect the activity, business, or income of a taxpayer within the city, the commissioner of finance shall be authorized in his or her discretion, in the case of a business allocation percentage, to adjust it by (1) excluding one or more of the factors therein; (2) including one or more factors, such as expenses, purchases, contract values (minus subcontract values); (3) excluding one or more assets in computing such allocation percentage, provided the income therefrom is also excluded in determining unincorporated business entire net income, or (4) any other similar or different method calculated to effect a fair and proper allocation of the income reasonably attributable to the city, and in the case of an investment allocation percentage, to adjust it by excluding one or more assets in computing such percentage; provided the income therefrom is also excluded in determining unincorporated business entire net income. The commissioner of finance from time to time shall publish all rulings of general public interest with respect to any application of the provisions of this subdivision.
(i)Notwithstanding subdivision (c) of this section, but subject to subdivision (g) of this section, the business allocation percentage shall be computed in the manner set forth in this subdivision.
(5)For taxable years beginning in two thousand thirteen, the business allocation percentage shall be determined by adding together the following percentages: (A) the product of sixteen and one-half percent and the percentage determined under paragraph one of subdivision (c) of this section, (B) the product of sixteen and one-half percent and the percentage determined under paragraph two of subdivision (c) of this section, and (C) the product of sixty-seven percent and the percentage determined under paragraph three of subdivision (c) of this section.
(6)For taxable years beginning in two thousand fourteen, the business allocation percentage shall be determined by adding together the following percentages: (A) the product of thirteen and one-half percent and the percentage determined under paragraph one of subdivision (c) of this section, (B) the product of thirteen and one-half percent and the percentage determined under paragraph two of subdivision (c) of this section, and (C) the product of seventy-three percent and the percentage determined under paragraph three of subdivision (c) of this section.
(7)For taxable years beginning in two thousand fifteen, the business allocation percentage shall be determined by adding together the following percentages: (A) the product of ten percent and the percentage determined under paragraph one of subdivision (c) of this section, (B) the product of ten percent and the percentage determined under paragraph two of subdivision (c) of this section, and (C) the product of eighty percent and the percentage determined under paragraph three of subdivision (c) of this section.
(8)For taxable years beginning in two thousand sixteen, the business allocation percentage shall be determined by adding together the following percentages: (A) the product of six and one-half percent and the percentage determined under paragraph one of subdivision (c) of this section, (B) the product of six and one-half percent and the percentage determined under paragraph two of subdivision (c) of this section, and (C) the product of eighty-seven percent and the percentage determined under paragraph three of subdivision (c) of this section.
(9)For taxable years beginning in two thousand seventeen, the business allocation percentage shall be determined by adding together the following percentages: (A) the product of three and one-half percent and the percentage determined under paragraph one of subdivision (c) of this section, (B) the product of three and one-half percent and the percentage determined under paragraph two of subdivision (c) of this section, and (C) the product of ninety-three percent and the percentage determined under paragraph three of subdivision (c) of this section.
(10)For taxable years beginning after two thousand seventeen, the business allocation percentage shall be the percentage determined under paragraph three of subdivision (c) of this section.
(11)The commissioner shall promulgate rules necessary to implement the provisions of this subdivision under such circumstances where any of the percentages to be determined under paragraph one, two or three of subdivision (c) of this section cannot be determined because the taxpayer has no property, payroll or gross receipts from sales or services within or without the city.
