Under section 11-654.2(2) of the Ad. Code, receipts from sales of tangible personal property will be sourced to NYC if you ship the goods to a point located in NYC or NYC is the destination for the goods. To make this determination, you may rely on section 4-4.2 of subpart 4-4 of the New York State Business Corporation Franchise Tax Regulations until the Department of Finance has promulgated a Rule that addresses the apportionment of receipts from sales of tangible personal property.
The loan is considered a loan secured by real property if 50% or more of the fair market value of the collateral used to secure the loan consists of real property. All the interest income from a loan secured by real property located in New York City is apportioned to New York City. If the loan is secured by real property located inside and outside of New York City, the amount of interest income apportioned to New York City is computed by multiplying the total interest income from the loan by the following ratio:
Fair Market Value of all Real Property Used to Secure the Loan
Interest income from loans not secured by real property (and not QFI, or QFI with no election to use fixed percentage method) is apportioned to New York City if the borrower is located in New York City. An individual is considered located in New York City if the individual’s billing address is in New York City. A business entity is considered located in New York City if the entity’s commercial domicile is in New York City.
The determination of the type of loan, fair market value of real property, and borrower’s location is made at the time the loan is entered into. If the loan is refinanced at a later date, you must re-determine the type of loan and the amount of income to apportion to New York City. See, Administrative Code § 11-654.2(i)(A) and (B).
Receipts from interest income on deposits are considered receipts from other financial instruments under Administrative Code § 11-654.2(5)(a)(2)(viii) and sourced to the payor’s commercial domicile.
The Department of Finance will review documents that establish your client’s eligibility for the exception and its calculation of the subtraction, including, but not limited to:
Note that if a loan satisfies the conditions set forth in 11-652(8)(t)(iii)(B)(I) and (II), the taxpayer must apply the proportionality restriction in sub-item (I).
Our current policy of excluding these dividends from Entire Net Income is being continued. See Administrative Code section 11-652(8)(a)(2-a).
A loan will be considered a “small business loan” if made to an active business that has had, for federal income tax purposes, an average number of full-time employees of 100 or fewer, not including general executive officers, and gross receipts of not greater than $10,000,000 in its immediately preceding taxable year. In the event that the entity applies for the loan in its first year of operations, satisfaction of the requirements in the preceding sentence is determined by the employees, receipts and assets of the business on the date of the loan application. In addition, the business may not be part of an affiliated group, as defined in section 1504 of the Internal Revenue Code, unless the group would have itself met, as a group, the active business, employee and the gross-receipts requirements. A business qualifies as an active business if the value of the financial instruments described in Section 11- 654.2(5)(a) of the Administrative Code of the City of New York that it holds for investment does not exceed 50% of the value of its total assets. A loan made to an entity that meets these requirements to be a small business at the time of the filing of the loan application, is deemed to be a small business loan throughout the term of such loan.
For this modification, a "residential mortgage loan" is a loan which meets the definition of an asset as described in Administrative Code section 11-652(8)(s)(2)(i)(D). Accordingly, a residential mortgage loan is:
Residential real property includes single or multi-family dwellings, facilities in residential developments dedicated to public use or property used on a nonprofit basis for residents, and mobile homes not used on a transient basis.
The designated agent appointed by the combined group under section 11-654.3(7) should file the extension request (Forms NYC-EXT and NYC-EXT.1, as applicable). An electronically filed Form NYC-EXT will be processed without a full list of the new combined group members, and the other taxpayer-members of the combined group do not need to file extension requests. Note, however, that the designated agent must claim all estimated payments and pre-payments made by combined group members by submitting a list with its Final return that identifies the members making payments, their employee identification numbers and the amounts of their payments. Taxpayers may contact eservices to resolve any discrepancies.
The designated agent may submit a single payment under its employer identification number for the entire group using Form NYC-400, Estimated Tax for Corporations.
Yes. At the time the return is filed, the member’s estimated tax payments will be moved to the account created for the combined group.
Yes, this applies to each corporation unless it may not be included in a combined report due to the exclusions in section 11-654.3(2)(c) of the Ad. Code. The exclusions apply to:
The unitary corporations’ activities conducted during the portion of the tax year that the capital stock requirement is met are included in the combined report.
Corporation A owns 60% of the voting power of the capital stock of Corporation B, 70% of the voting power of the capital stock of Corporation C, and 55% of the voting power of the capital stock of Corporation D. The corporations are unitary and are calendar-year taxpayers. Corporation A sells its entire investment in Corporation B on June 19, 2015, to Corporation E. Corporation B is not unitary with Corporation E. Corporations B, C, and D are subject to tax in New York. Corporations A and E do not have taxable nexus with NYC and are not NYC taxpayers.
Corporations A, B, C, and D are required to file a combined return for the period January 1, 2015 through December 31, 2015. The business activities of Corporation B are required to be included in that combined return only for the period January 1, 2015 through June 19, 2015. Corporation B is required to file a separate Business Corporation Tax return (Form NYC-2) for the short period June 20, 2015 through December 31, 2015. Corporation E is not required to file a Business Corporation Tax return.
It is a facts and circumstances determination upon acquisition.
The election is made on the original return of the combined group that is timely filed (including valid extensions of time for filing). There will be an indicator on the combined return for this election.
Generally, a corporation with a fiscal tax year may be included in a combined report with a calendar- year taxpayer. If a corporation does not have the same tax year as the taxpayer designated as the agent for the combined group, the corporation’s income and activities for its tax year that ends within the tax year of the designated agent are included in the combined report. However, any corporation with a fiscal tax year that begins in 2014 and ends in 2015 cannot be included in a combined report with any other corporation that has a tax year beginning on or after January 1, 2015. Fiscal-year taxpayers must file a separate tax return from that of its designated agent for a tax year that began in 2014 and ends in 2015, if the designated agent's tax year begins on or after January 1, 2015. A fiscal-year taxpayer may be included in a combined report with its designated agent starting with its first fiscal year that begins on or after January 1, 2015. See also, Finance Memorandum 15-2 (April 17, 2015)
The 2015 Business Corporation Tax forms and instructions for single corporation filers (Form NYC-2 and feeder forms) and for combined group filers (Form NYC-2A and feeder forms) are currently available on our website.
If the forms you need to file your Business Corporation Tax return for 2015 are not yet available to be e-filed, you should electronically file a Form NYC-EXT Request for Six-Month Extension to File. Additional information about e-filing your extension request can be found here.
The Department is accepting e-filed 2015 Forms NYC-2, 2.1, 2.2, 2.3, 2.4 and 2.5 and other ancillary forms. Check here periodically check here for the most current e-file approval status of each software developer’s 2015 Business Corporation Tax forms.
You should file again using the appropriate tax return for the Business Corporation Tax and check the box to indicate that it’s an amended return. The Form NYC-2 is available on our website, and through certain approved software vendors, for single corporation filers. Corporations that file on a combined return must use the Form NYC-2A, which is also available on our Website.
Yes. If an alien corporation has income, gain, or loss that is effectively connected with a U.S. trade or business, conducted in New York City, it is considered a taxpayer under the Business Corporation Tax. If an alien corporation has income, gain, or loss that is effectively connected with a U.S. trade or business, it is subject to the requirements of a combined report.
Yes, because this capital may also generate taxable business income, such as capital gains from the sale of stock in a unitary corporation that is not included in a combined report with the taxpayer.
Yes, a business capital investment in a company that would be taxable under chapter 11 if it conducted business in the City is eligible for the .075% tax rate.
No, a business capital investment in an HMO is subject to the generally applicable .15% tax rate and is not eligible for the .075% tax rate because an HMO is subject to tax as a regular business corporation rather than an insurance corporation. DOF will monitor the appeal of the NYC Tax Appeals Tribunal decision In The Matter of Aetna, Inc., TAT(E)12-3(GC), TAT(E)12-4(GC) (NYC Tax App. Trib. June 3, 2016) for its effect, if any, on this conclusion.
For the avoidance of doubt, DOF will not look-through to the underlying investments of the HMO, to characterize the investment in the HMO itself. The nature of the business capital investments of the HMO will only be relevant to the extent it is a separate filer and computes its own tax on capital or it becomes a member of a combined group, in which case, it will aggregate its business capital investments with the other members of the combined group to determine the total tax on capital for the group.
No. The current aggregate theory approach is continued and partnership items of receipts, income, gain, loss, and deduction, including attributes related to payroll and property factors, flow through a partnership to a corporate partner.
The credit carryforward provisions were included in the new Subchapter 3-A. Any credit carried forward from a year prior to corporate tax reform may continue to be carried forward and used against the tax imposed under Subchapter 3-A in tax years 2015 and after, under the same rules that applied prior to reform.
No. The Department of Finance is bound to follow the taxpayer’s election.
The 20% ownership presumption is rebuttable. If the Department chooses to rebut the presumption, the burden will fall on the Department to demonstrate that the less than 20% owned subsidiary is unitary with the taxpayer.
No. Under U.S. Supreme Court case law, a state cannot treat an item of income of a taxpayer subject to tax in the state as apportionable business income if the state does not have constitutional nexus with that item of income. The Department will not attempt to offer guidance beyond existing Supreme Court case law as to how this constitutional doctrine would apply under particular facts and circumstances.
The tax rate applicable to a qualified New York manufacturing corporation depends upon both the amount of its business income allocated to the City and the amount of its total business income prior to allocation. Administrative Code sections 11-654(1)(k)(1), (2) and (3) require separate alternative tax rate calculations using each amount. To determine its applicable tax rate, the corporation must, first, calculate its tax rate with reference to business income allocated to the City, second, calculate its tax rate with reference to business income prior to allocation, and, third, select the highest rate resulting from these calculations. Each calculation is necessary even if the corporation’s allocated business income is less than $10 million. Accordingly, the tax rate based on total business income prior to allocation sets a minimum, not a maximum, tax rate. No tax rate reduction applies at all if the corporation’s income allocated to the City is $20 million or greater or its business income prior to allocation is $40 million or greater.
Corporate tax reform did not change the MFI rules. MFI will continue to be based on rules in effect for a taxpayer’s 2014 tax return.
No. The mandatory first installment is still based on the prior year’s tax. The remaining three estimated tax payments should reflect the anticipated liability for the current tax year. Therefore, when determining the amount of the 2nd, 3rd and 4th estimated tax payments for tax years that begin on or after January 1, 2015, the effect of the corporation tax reform rules should be taken into consideration.
However, as a general matter, the Department will not assert an underpayment of estimated tax for any payment due on or prior to June 15, 2015, if the taxpayer makes the required declarations and payments in full no later than the first due date after June 15, 2015 on which an installment of estimated tax is required to be paid, together with all other such declarations and payments.
NOLs can be carried back 3 years. However, an NOL generated in 2015 or later cannot be carried back to a tax year commencing prior to January 1, 2015.
No. The corporation may establish an NOL carryforward balance under the GCT that reflects the NOLs it incurred while a taxpayer in the City, and it must determine that balance as if it used the greater of (i) the NOLs it would have used under the GCT and (ii) the NOLs it effectively used under the Business Corporation Tax (Subchapter 3-A). The following steps explain this calculation:
B is a non-financial corporation and it elects to be taxed as an S-corporation for federal income tax purposes, effective January 1, 2016. It has been a corporate taxpayer in the City since its formation.
Under the steps above, B would calculate its NOL carryforward for the GCT as follows:
For tax years beginning on or after January 1, 2015, both the PNOL conversion subtraction and the NOLD are applied against apportioned business income.
Unused net operating losses incurred for tax years beginning prior to January 1, 2015, must be converted into a prior net operating loss conversion (PNOLC) subtraction pool. The PNOLC pool and the amount to deduct annually are computed on Form NYC-2.3, Prior Net Operating Loss Conversion (PNOLC) Subtraction, and reported on Schedule B, line 33 on Form NYC-2 or NYC-2A. Unused net operating losses from tax years beginning prior to January 1, 2015, are not included on Schedule B, line 35, Net operating loss deduction, of Form NYC-2 or NYC-2A.
In order to carryback the loss, file an amended return for the year to which the NOL is being carried back, and include the amount of NOL being carried back on Form NYC-2 or NYC-2A Schedule B, Line 35. If the NOL is being carried back to the first tax year that begins on or after January 1, 2015, file a paper return and write in the NOL on Schedule B, Line 35. Form NYC-2.4 must be attached to the amended return, showing the specific tax year from which NOLs have been used to reduce business income in Schedule A. A copy of the return previously filed with the City for the loss year must also be attached to the amended return.
Note that an NOL may be carried back three taxable years preceding the tax year of the loss (the loss year). However, a loss cannot be carried back to a tax year beginning before January 1, 2015. The loss is first carried to the earliest of the three tax years preceding the loss year. If the loss is not entirely used in that year, it is carried to the second tax year preceding the loss year, and any remaining amount is carried to the third tax year immediately preceding the loss year. Any unused amount of loss then remaining may be carried forward for as many as 20 tax years following the loss year. Administrative Code § 11-654.1(3)(d).
Taxpayers who have made the 50% PNOLC subtraction election can revoke that election by timely filing an amended 2015 Form NYC-2 or NYC-2A return. The prior net operating loss conversion subtraction amount on Line 33 of Schedule B should reflect a 10% PNOLC subtraction allotment, and a revised Form NYC-2.3 must be attached which indicates that the PNOLC pool will be utilized over a ten year period.
An amended Form NYC-2 or NYC-2A return must be filed along with a revised Form NYC-2.3 for each subsequent tax year in which the taxpayer could have claimed a PNOLC subtraction or carried forward an unused PNOLC subtraction balance.
Any change to a taxpayer’s UNOL may be made within the general 3-year limitations period for assessments and refunds provided under Admin Code Section 11-674(1), determined with regard to an extension of time agreed to under 11-674(3)(b), for the return on which a PNOLC subtraction is first claimed.
The BCT will not apply to C-corporations for tax years beginning on or after January 1, 2015. Therefore, a former BCT taxpayer is subject to tax under Subchapter 3-A starting with its first fiscal tax year that begins on or after January 1, 2015.
The City intends to issue rules that correspond to the regulations New York State will issue under Article 9-A of the Tax Law to implement corporate tax reform, in so far as the underlying statutes themselves correspond. The City will make draft regulations available after the State has finalized its new and revised regulations and indicates that it will initiate adoption under the formal New York State Administrative Procedures Act. Until that time, to prepare their returns for the Business Corporation Tax, corporations may rely on the draft regulations that the State Department of Taxation and Finance has posted on its website, by substituting the City for the State where necessary and disregarding provisions that do not correspond to Subchapter 3-A (such as economic nexus).
A large corporation is one that had, or whose predecessor had, business income allocated within the City, of at least $1 million for any of the three tax years immediately preceding the tax year for which the exception is being sought. See, Administrative Code § 11-676(5)(a).