§ 11-654.2 Receipts allocation.
AC § 11-654.2
1.The percentage of receipts of the taxpayer to be allocated to the city for purposes of subparagraph two of paragraph (a) of subdivision three of section 11-654 of this subchapter shall be equal to the receipts fraction determined pursuant to this section. The receipts fraction is a fraction, determined by including only those receipts, net income, net gains, and other items described in this section that are included in the computation of the taxpayer's business income (determined without regard to the modification provided in subparagraph fourteen of paragraph (a) of subdivision eight of section 11-652 of this subchapter) for the taxable year. The numerator of the receipts fraction shall be equal to the sum of all the amounts required to be included in the numerator pursuant to the provisions of this section and the denominator of the receipts fraction shall be equal to the sum of all the amounts required to be included in the denominator pursuant to the provisions of this section.
2.
(a)Receipts from sales of tangible personal property where shipments are made to points within the city or the destination of the property is a point within the city shall be included in the numerator of the receipts fraction. Receipts from sales of tangible personal property where shipments are made to points within and without the city or the destination is within and without the city shall be included in the denominator of the receipts fraction.
(b)Receipts from sales of electricity delivered to points within the city shall be included in the numerator of the receipts fraction. Receipts from sales of electricity delivered to points within and without the city shall be included in the denominator of the receipts fraction.
(c)Receipts from sales of tangible personal property and electricity that are traded as commodities as the term "commodity" is defined in section four hundred seventy-five of the internal revenue code, shall be included in the receipts fraction in accordance with clause (ix) of subparagraph two of paragraph (a) of subdivision five of this section.
(d)Net gains (not less than zero) from the sales of real property located within the city shall be included in the numerator of the receipts fraction. Net gains (not less than zero) from the sales of real property located within and without the city shall be included in the denominator of the receipts fraction.
3.
4.
5.
(1)In determining the inclusion of receipts and net gains from qualified financial instruments in the receipts fraction, taxpayers may elect to use the fixed percentage method described in this subparagraph for qualified financial instruments. The election is irrevocable, applies to all qualified financial instruments, and must be made on an annual basis on the taxpayer's original, timely filed return (determined with regard to extensions). If the taxpayer elects the fixed percentage method, then all income, gain or loss, including marked to market net gains as defined in clause (x) of subparagraph two of this paragraph, from qualified financial instruments constitute business income, gain or loss. If the taxpayer does not elect to use the fixed percentage method, then receipts and net gains are included in the receipts fraction in accordance with the customer sourcing method described in subparagraph two of this paragraph. Under the fixed percentage method, eight percent of all net income (not less than zero) from qualified financial instruments shall be included in the numerator of the receipts fraction. All net income (not less than zero) from qualified financial instruments shall be included in the denominator of the receipts fraction.
(2)Receipts and net gains from qualified financial instruments, in cases where the taxpayer did not elect to use the fixed percentage method described in subparagraph one of this paragraph, and from nonqualified financial instruments shall be included in the receipts fraction in accordance with this subparagraph. For purposes of this paragraph, an individual is deemed to be located within the city if his or her billing address is within the city. A business entity is deemed to be located within the city if its commercial domicile is located within the city.
(i)(A) Receipts constituting interest from loans secured by real property located within the city shall be included in the numerator of the receipts fraction. Receipts constituting interest from loans secured by real property located within and without the city shall be included in the denominator of the receipts fraction. (B) Receipts constituting interest from loans not secured by real property shall be included in the numerator of the receipts fraction if the borrower is located within the city. Receipts constituting interest from loans not secured by real property, whether the borrower is located within or without the city, shall be included in the denominator of the receipts fraction. (C) Net gains (not less than zero) from sales of loans secured by real property shall be included in the numerator of the receipts fraction as provided in this subclause. The amount of net gains from the sales of loans secured by real property included in the numerator of the receipts fraction shall be determined by multiplying the net gains by a fraction, the numerator of which shall be the amount of gross proceeds from sales of loans secured by real property located within the city and the denominator of which shall be the gross proceeds from sales of loans secured by real property located within and without the city. Gross proceeds shall be determined after the deduction of any cost incurred to acquire the loans but shall not be less than zero. Net gains (not less than zero) from sales of loans secured by real property located within and without the city shall be included in the denominator of the receipts fraction. (D) Net gains (not less than zero) from sales of loans not secured by real property shall be included in the numerator of the receipts fraction as provided in this subclause. The amount of net gains from the sales of loans not secured by real property included in the numerator of the receipts fraction shall be determined by multiplying the net gains by a fraction, the numerator of which shall be the amount of gross proceeds from sales of loans not secured by real property to purchasers located within the city and the denominator of which shall be the amount of gross proceeds from sales of loans not secured by real property to purchasers located within and without the city. Gross proceeds shall be determined after the deduction of any cost incurred to acquire the loans but shall not be less than zero. Net gains (not less than zero) from sales of loans not secured by real property shall be included in the denominator of the receipts fraction. (E) For purposes of this subdivision, a loan is secured by real property if fifty percent or more of the value of the collateral used to secure the loan, when valued at fair market value as of the time the loan was entered into, consists of real property.
(ii)Federal, state, and municipal debt. Receipts constituting interest and net gains from sales of debt instruments issued by the United States, any state, or political subdivision of a state shall not be included in the numerator of the receipts fraction. Receipts constituting interest and net gains (not less than zero) from sales of debt instruments issued by the United States and the state of New York or its political subdivisions, including the city, shall be included in the denominator of the receipts fraction. Fifty percent of the receipts constituting interest and net gains (not less than zero) from sales of debt instruments issued by other states or their political subdivisions shall be included in the denominator of the receipts fraction.
(iii)Asset backed securities and other government agency debt. Eight percent of the interest income from asset backed securities or other securities issued by government agencies, including but not limited to securities issued by the government national mortgage association (GNMA), the federal national mortgage association (FNMA), the federal home loan mortgage corporation (FHLMC), or the small business administration, or eight percent of the interest income from asset backed securities issued by other entities shall be included in the numerator of the receipts fraction. Eight percent of the net gains (not less than zero) from (A) sales of asset backed securities or other securities issued by government agencies, including but not limited to securities issued by GNMA, FNMA, FHLMC, or the small business administration, or (B) sales of other asset backed securities that are sold through a registered securities broker or dealer or through a licensed exchange, shall be included in the numerator of the receipts fraction. The amount of net gains (not less than zero) from sales of other asset backed securities not referenced in subclause (A) or (B) of this clause included in the numerator of the receipts fraction shall be determined by multiplying such net gains by a fraction, the numerator of which shall be the amount of gross proceeds from such sales to purchasers located in the city and the denominator of which shall be the amount of gross proceeds from such sales to purchasers located within and without the city. Receipts constituting interest income from asset backed securities and other securities referenced in this clause and net gains (not less than zero) from sales of asset backed securities and other securities referenced in this clause shall be included in the denominator of the receipts fraction. Gross proceeds shall be determined after the deduction of any cost to acquire the securities but shall not be less than zero.
(iv)Receipts constituting interest from corporate bonds shall be included in the numerator of the receipts fraction if the commercial domicile of the issuing corporation is within the city. Eight percent of the net gains (not less than zero) from sales of corporate bonds sold through a registered securities broker or dealer or through a licensed exchange shall be included in the numerator of the receipts fraction. The amount of net gains (not less than zero) from other sales of corporate bonds included in the numerator of the receipts fraction shall be determined by multiplying such net gains by a fraction, the numerator of which is the amount of gross proceeds from such sales to purchasers located within the city and the denominator of which is the amount of gross proceeds from sales to purchasers located within and without the city. Receipts constituting interest from corporate bonds, whether the issuing corporation's commercial domicile is within or without the city, and net gains (not less than zero) from sales of corporate bonds to purchasers within and without the city shall be included in the denominator of the receipts fraction. Gross proceeds shall be determined after the deduction of any cost to acquire the bonds but shall not be less than zero.
(v)Eight percent of net interest income (not less than zero) from reverse repurchase agreements and securities borrowing agreements shall be included in the numerator of the receipts fraction. Net interest income (not less than zero) from reverse repurchase agreements and securities borrowing agreements shall be included in the denominator of the receipts fraction. Net interest income from reverse repurchase agreements and securities borrowing agreements shall be determined for purposes of this subdivision after the deduction of the interest expense from the taxpayer's repurchase agreements and securities lending agreements but shall not be less than zero. For this calculation, the amount of such interest expense shall be the interest expense associated with the sum of the value of the taxpayer's repurchase agreements where it is the seller/borrower plus the value of the taxpayer's securities lending agreements where it is the securities lender, provided such sum is limited to the sum of the value of the taxpayer's reverse repurchase agreements where it is the purchaser/lender plus the value of the taxpayer's securities lending agreements where it is the securities borrower.
(vi)Eight percent of the net interest (not less than zero) from federal funds shall be included in the numerator of the receipts fraction. The net interest (not less than zero) from federal funds shall be included in the denominator of the receipts fraction. Net interest from federal funds shall be determined after deduction of interest expense from federal funds.
(vii)Dividends from stock, net gains (not less than zero) from sales of stock and net gains (not less than zero) from sales of partnership interests shall not be included in either the numerator or denominator of the receipts fraction unless the commissioner of finance determines pursuant to subdivision eleven of this section that inclusion of such dividends and net gains (not less than zero) is necessary to properly reflect the business income or capital of the taxpayer.
(viii)(A) Receipts constituting interest from other financial instruments shall be included in the numerator of the receipts fraction if the payor is located within the city. Receipts constituting interest from other financial instruments, whether the payor is within or without the city, shall be included in the denominator of the receipts fraction. (B) Net gains (not less than zero) from sales of other financial instruments and other income (not less than zero) from other financial instruments where the purchaser or payor is located within the city shall be included in the numerator of the receipts fraction, provided that, if the purchaser or payor is a registered securities broker or dealer or the transaction is made through a licensed exchange, then eight percent of the net gains (not less than zero) or other income (not less than zero) shall be included in the numerator of the receipts fraction. Net gains (not less than zero) from sales of other financial instruments and other income (not less than zero) from other financial instruments shall be included in the denominator of the receipts fraction.
(ix)Net income (not less than zero) from sales of physical commodities shall be included in the numerator of the receipts fraction as provided in this clause. The amount of net income from sales of physical commodities included in the numerator of the receipts fraction shall be determined by multiplying the net income from sales of physical commodities by a fraction, the numerator of which shall be the amount of receipts from sales of physical commodities actually delivered to points within the city or, if there is no actual delivery of the physical commodity, sold to purchasers located within the city, and the denominator of which shall be the amount of receipts from sales of physical commodities actually delivered to points within and without the city or, if there is no actual delivery of the physical commodity, sold to purchasers located within and without the city. Net income (not less than zero) from sales of physical commodities shall be included in the denominator of the receipts fraction. Net income (not less than zero) from sales of physical commodities shall be determined after the deduction of the cost to acquire or produce the physical commodities.
(x)(A) For purposes of this subdivision, "marked to market" means that a financial instrument is, under section four hundred seventy-five or section twelve hundred fifty-six of the internal revenue code, treated by the taxpayer as sold for its fair market value on the last business day of the taxpayer's taxable year. "Marked to market gain or loss" means the gain or loss recognized by the taxpayer under section four hundred seventy-five or section twelve hundred fifty-six of the internal revenue code because the financial instrument is treated as sold for its fair market value on the last business day of the taxpayer's taxable year. (B) The amount of marked to market net gains (not less than zero) from each type of financial instrument that is marked to market included in the numerator of the receipts fraction shall be determined by multiplying the marked to market net gains (not less than zero) from such type of financial instrument by a fraction, the numerator of which shall be the numerator of the receipts fraction for net gains from that type of financial instrument determined under the applicable clause of this subparagraph and the denominator of which shall be the denominator of the receipts fraction for net gains from that type of financial instrument determined under the applicable clause of this subparagraph. Marked to market net gains (not less than zero) from financial instruments for which the numerator of the receipts fraction for net gains is determined under the immediately preceding sentence shall be included in the denominator of the receipts fraction. (C) If the type of financial instrument that is marked to market is not otherwise sourced by the taxpayer under this subparagraph, or if the taxpayer has a net loss from the sales of that type of financial instrument under the applicable clause of this subparagraph, the amount of marked to market net gains (not less than zero) from that type of financial instrument included in the numerator of the receipts fraction shall be determined by multiplying the marked to market net gains (but not less than zero) from that type of financial instrument by a fraction, the numerator of which shall be the sum of the amount of receipts included in the numerator of the receipts fraction under clauses (i) through (ix) of this subparagraph and subclause (B) of this clause, and the denominator of which shall be the sum of the amount of receipts included in the denominator of the receipts fraction under clauses (i) through (ix) of this subparagraph and subclause (B) of this clause. Marked to market net gains (not less than zero) for which the amount to be included in the numerator of the receipts fraction is determined under the immediately preceding sentence shall be included in the denominator of the receipts fraction.
(3)(i) Receipts constituting fees earned by the taxpayer for advisory services to a customer in connection with the underwriting of securities for such customer (such customer being the entity that is contemplating issuing or is issuing securities) or fees earned by the taxpayer for managing an underwriting shall be deemed to be generated within the city if the mailing address in the records of the taxpayer of such customer who is responsible for paying such fees is within the city.
(4)Receipts constituting account maintenance fees shall be deemed to be generated within the city if the mailing address in the records of the taxpayer of the customer who is responsible for paying such account maintenance fees is within the city.
(5)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 (d) of this subdivision, shall be deemed to be generated within the city if the mailing address in the records of the taxpayer of the customer who is responsible for paying such fees is within the city.
(6)Receipts constituting interest earned by the taxpayer on loans and advances made by the taxpayer to a corporation affiliated with the taxpayer but with which the taxpayer is not permitted or required to file a combined report pursuant to section 11-654.3 of this subchapter shall be deemed to arise from services performed at the principal place of business of such affiliated corporation.
(7)If the taxpayer receives any of the receipts enumerated in subparagraphs one through four of this paragraph as a result of a securities correspondent relationship such taxpayer has with another broker or dealer with the taxpayer acting in this relationship as the clearing firm, such receipts shall be deemed to be generated within the city to the extent set forth in each of such subparagraphs. The amount of such receipts shall exclude the amount the taxpayer is required to pay to the correspondent firm for such correspondent relationship. If the taxpayer receives any of the receipts enumerated in subparagraphs one through four of this paragraph as a result of a securities correspondent relationship such taxpayer has with another broker or dealer with the taxpayer acting in this relationship as the introducing firm, such receipts shall be deemed to be generated within the city to the extent set forth in each of such subparagraphs.
(8)If, for the purposes of subparagraph one, subparagraph two, clause (i) of subparagraph three, subparagraph four, or subparagraph five of this paragraph, the taxpayer is unable from its records to determine the mailing address of the customer, eight percent of the receipts shall be included in the numerator of the receipts fraction.
(e)For purposes of this subdivision, a taxpayer shall use the following hierarchy to determine the commercial domicile of a business entity, based on the information known to the taxpayer or information that would be known upon reasonable inquiry: (1) the seat of management and control of the business entity; and (2) the billing address of the business entity in the taxpayer's records. The taxpayer must exercise due diligence before rejecting the first method in this hierarchy and proceeding to the next method.
(f)For purposes of this subdivision, the term "registered securities broker or dealer" means a broker or dealer registered as such by the securities and exchange commission or a broker or dealer registered as such by the commodities futures trading commission, and shall include an OTC derivatives dealer as defined under regulations of the securities and exchange commission at 17 CFR 240.3b-12. 5-a. Notwithstanding any other provision of this section, net global intangible low-taxed income shall be included in the receipts fraction as provided in this subdivision. Receipts constituting net global intangible low-taxed income shall not be included in the numerator of the receipts fraction. Receipts constituting net global intangible low-taxed income shall be included in the denominator of the receipts fraction. For purposes of this subdivision, the term "net global intangible low-taxed income" means the amount required to be included in the taxpayer's federal gross income pursuant to subsection (a) of section 951A of the internal revenue code less the amount of the deduction allowed under clause (i) of section 250(a)(1)(B) of such code.
6.Receipts from the conduct of a railroad business (including surface railroad, whether or not operated by steam, subway railroad, elevated railroad, palace car or sleeping car business) or a trucking business shall be included in the numerator of the receipts fraction as follows. The amount of receipts from the conduct of a railroad business or a trucking business included in the numerator of the receipts fraction shall be determined by multiplying the amount of receipts from such business by a fraction, the numerator of which shall be the miles in such business within the city during the period covered by the taxpayer's report and the denominator of which shall be the miles in such business within and without the city during such period. Receipts from the conduct of the railroad business or a trucking business shall be included in the denominator of the receipts fraction.
7.
8.
9.Receipts from the transportation or transmission of gas through pipes shall be included in the numerator of the receipts fraction as follows. The amount of receipts from the transportation or transmission of gas through pipes included in the numerator of the receipts fraction shall be determined by multiplying the total amount of such receipts by a fraction, the numerator of which shall be the taxpayer's transportation units within the city and the denominator of which shall be the taxpayer's transportation units within and without the city. A transportation unit is the transportation of one cubic foot of gas over a distance of one mile. The total amount of receipts from the transportation or transmission of gas through pipes shall be included in the denominator of the receipts fraction.
10.
11.If it shall appear that the receipts fraction determined pursuant to this section does not result in a proper reflection of the taxpayer's business income or capital within the city, the commissioner of finance is authorized in his or her discretion to adjust it, or the taxpayer may request that the commissioner of finance adjust it, by (a) excluding one or more items in such determination, (b) including one or more other items in such determination, or (c) any other similar or different method calculated to effect a fair and proper allocation of the business income and capital reasonably attributed to the city. The party seeking the adjustment shall bear the burden of proof to demonstrate that the receipts fraction determined pursuant to this section does not result in a proper reflection of the taxpayer's business income or capital within the city and that the proposed adjustment is appropriate.
12.Receipts from the operation of vessels shall be included in the numerator of the receipts fraction as follows. The amount of receipts from the operation of vessels included in the numerator of the receipts fraction shall be determined by multiplying the amount of such receipts by a fraction, the numerator of which shall be the aggregate number of working days of the vessels owned or leased by the taxpayer in territorial waters of the city during the period covered by the taxpayer's report and the denominator of which shall be the aggregate number of working days of all vessels owned or leased by the taxpayer during such period. Receipts from the operation of vessels shall be included in the denominator of the receipts fraction. (Am. 2016 N.Y. Laws Ch. 60, 4/13/2016, eff. 4/13/2016; Am. 2017 N.Y. Laws Ch. 59, 4/10/2017, eff. 4/10/2017; Am. 2019 N.Y. Laws Ch. 59, 4/12/2019, eff. 4/12/2019)
