N.Y. Comp. Codes R. & Regs. Tit. 20 §§ 3-2.2

Current through Register Vol. 46, No. 45, November 2, 2024

Section 3-2.2 - Adjusting tax bases to period covered by report

(Tax Law, sections 208(9)(h), 210(2))

(a) Entire net income (ENI).

(1) Except in the case of a New York S termination year, if the ENI required to be reported under article 9-A is for a period different from the period covered by the taxpayer's Federal income tax return, the taxpayer's ENI must be prorated to correspond with the period covered by the report under article 9-A. The prorated ENI is computed as follows:

(i) adjust Federal taxable income to arrive at ENI in the manner set forth in section 3-3.1 of this Part;

(ii) multiply ENI by the number of calendar months, or major parts thereof, covered by the report under article 9-A; and

(iii) divide the result by the number of calendar months, or major parts thereof, covered by the return for Federal income tax purposes. Other exempt income and investment income must be similarly prorated.

(2) Examples.

Example 1: A calendar year taxpayer was organized in 2017 under the laws of another state where it carried on its business. It began doing business in New York State on March 14, 2022. It files its return for Federal income tax purposes for the calendar year 2022 and its Federal taxable income was $70,000. In computing its ENI for the period March 14, 2022, to December 31, 2022, its Federal taxable income of $70,000 for the calendar year 2022 is first adjusted as required by section 3-3.1 of this Part. The taxpayer's ENI after those adjustments was $78,000. That ENI must be multiplied by 10 (the number of months from March to December) and the product divided by 12, resulting in a prorated ENI of $65,000.

Example 2: Same facts as in Example 1, except that the taxpayer began doing business in New York State on March 20, 2022. The ENI of $78,000 must be multiplied by 9 and the product divided by 12, resulting in a prorated ENI of $58,500.

(3) The method of computing ENI set forth in paragraph (1) of this subdivision applies to taxpayers reporting on either a calendar year or a fiscal year basis for Federal income tax purposes.

(b) Business and investment capital. If a period covered by a report under article 9-A is other than 12 calendar months, the amount of business capital and the amount of investment capital are each determined by multiplying its average value, by the number of calendar months, or major parts thereof, included in that period, and dividing the product by 12.

(1) Example.

A foreign corporation began to do business in New York State on June 10, 2022, and reports on a calendar year basis. The average value of its total investment capital for that year was $60,000, and the average value of its total business capital was $240,000. The amount of each class of capital, for purposes of computing the tax for taxable year 2022, is determined by multiplying each of the above amounts by seven (the number of months from June to December) and dividing the product by 12, resulting in investment capital of $35,000 and business capital of $140,000.

(c) Fixed dollar minimum tax. If the taxable period covered by a report under article 9-A is less than 12 months, the amount of New York receipts used to determine the amount of the fixed dollar minimum tax is determined by dividing the amount of the receipts for the period covered by the report by the number of months, or major parts thereof, in that period and multiplying the result by 12. In addition, the amount of fixed dollar minimum tax determined under section 210(1)(d)(1) shall be reduced by:

(1) 25% if the period for which the taxpayer is subject to tax is more than six months but not more than nine months, or

(2) 50% if the period for which the taxpayer is subject to tax is not more than six months.

(3) Example.

A foreign corporation began to business in New York State on May 10, 2022, and reports on a calendar year basis. During the period from May 10, 2022, through December 31, 2022, its New York receipts is $2,500,000. The amount of the receipts used to determine its fixed dollar minimum is $3,750,000, which is determined by dividing 2,500,000 by 8 and multiplying the result by 12. The fixed dollar minimum tax when New York receipts are $3,750,000 is $1,500. Because the period covered by the report is more than 6 months but less than 9 months, the amount of the fixed dollar minimum tax is reduced by 25% to 1,125.

(d) Whenever the tax base is prorated for a tax period of less than 12 months, the business apportionment fraction must be determined pursuant to section 210-A and this Subchapter, using only those receipts, net income, net gain and other items for the period for which it is subject to tax in New York State. This short period BAF must be applied to business income and business capital that have been prorated to represent business income and business capital for the period for which the corporation is subject to tax in New York State as required by this section. With such short period report, a corporation must submit complete details showing how it computed amounts using the rules for this section for the period it is subject to tax in New York State, if for less than a full year. If, in the opinion of the commissioner, the prorated business income or prorated business capital for the period for which the corporation is subject to tax in New York State does not properly reflect the business income or business capital for such period, the commissioner may determine business income or business capital solely on the basis of the corporation's business income or business capital during such period.

N.Y. Comp. Codes R. & Regs. Tit. 20 §§ 3-2.2

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