N.Y. Comp. Codes R. & Regs. tit. 20 § 3-2.1

Current through Register Vol. 46, No. 25, June 18, 2024

Section 3-2.1 - Correcting distortions of income or capital

(Tax Law, section 211(5))

(a) In case it shall appear to the commissioner that any agreement, understanding or arrangement exists between the corporation and any other corporation or any person or firm, whereby the activity, business, income or capital of the corporation within New York State is improperly or inaccurately reflected, the commissioner is authorized in the commissioner's discretion to adjust items of income (including gains and losses), deductions, and capital. In addition, the commissioner is authorized in the commissioner's discretion to disregard assets and the receipts derived therefrom in computing the business apportionment fraction or the MCTD apportionment percentage, provided that any income directly traceable thereto is also excluded from entire net income (ENI) so as to equitably determine the tax.

(b) The commissioner may include in the ENI of any taxpayer the fair profits that, but for an agreement, arrangement or understanding as described in subdivision (a) of this section, the taxpayer might have derived from any transaction:

(1) where the taxpayer conducts its activity or business under any agreement, arrangement, or understanding in such manner as either directly or indirectly to benefit its members or stockholders, or any of them, or any person or persons directly or indirectly interested in such activity or business, by entering into any transaction at more or less than a fair price that, but for such agreement, arrangement or understanding, might have been paid or received thereof; or

(2) where the taxpayer, a substantial portion of the voting power of whose capital stock is owned or controlled either directly or indirectly by another corporation, enters into any transaction with such other corporation on such terms as to create an improper loss or net income.

(c) Where any taxpayer owns or controls, directly or indirectly, more than 50% of the voting power of the capital stock of another corporation subject to tax under section 1502-A and 50% or less of whose gross receipts for the taxable year consist of premiums, the commissioner may include in the ENI of the taxpayer, as a deemed distribution, the amount of the net income of the other corporation that is in excess of its net premium income.

N.Y. Comp. Codes R. & Regs. Tit. 20 § 3-2.1

Adopted New York State Register December 27, 2023/Volume XLV, Issue 52, eff. 12/27/2023