N.Y. Comp. Codes R. & Regs. Tit. 20 §§ 3-4.6

Current through Register Vol. 46, No. 39, September 25, 2024

Section 3-4.6 - Definition of other exempt income

(Tax Law, section 208(6-a))

(a) Controlled foreign corporation (CFC) stock and related income.

(1) CFC stock means investments in stock of a corporation that generates, or could generate, exempt CFC income.

(2) Gross exempt CFC income, as described in this subdivision, shall not constitute investment income or exempt unitary corporation dividends. Gross exempt CFC income is:

(i) except to the extent described in subparagraph (ii), income required to be included in the taxpayer's Federal gross income pursuant to IRC section 951(a) received from a corporation that is conducting a unitary business with the taxpayer, but that is not included in a combined report with the taxpayer;

(ii) the income required to be included in the taxpayer's Federal gross income pursuant to IRC section 951(a) by reason of IRC section 965(a), as adjusted by IRC section 965(b), and without regard to IRC section 965(c), received from a corporation that is not included in a combined report with the taxpayer; and

(iii) 95% of the income required to be included in the taxpayer's Federal gross income pursuant to subsection (a) of IRC section 951A, without regard to the deduction under IRC section 250, received from a corporation that is not included in a combined report with the taxpayer.

(3) Exempt CFC income is gross exempt CFC income less either:

(i) interest deductions directly or indirectly attributable to gross exempt CFC income as determined in section 3-4.7 of this Subpart; or

(ii) the safe harbor reduction amount determined in section 3-4.8 of this Subpart.

(4) Total gross income from CFC stock is the sum of net capital gains in excess of capital losses from the sale of CFC stock plus gross exempt CFC income.

(b) Cross-article corporation stock and related income.

(1) Cross-article corporation stock means investments in stock of a corporation that is taxable under article 9 or 33, or would be taxable under article 9 or 33 if subject to tax, and is conducting a unitary business with the taxpayer, but is not included in a combined report with the taxpayer.

(2) Gross exempt cross-article dividends mean dividend income received from cross-article stock, before the reduction for interest deductions directly or indirectly attributable to gross exempt cross-article dividends as determined in section 3-4.7 of this Subpart.

(3) Exempt cross-article dividends mean gross exempt cross-article dividends, less the interest deductions directly or indirectly attributable to gross exempt cross-article dividends as determined in section 3-4.7 of this Subpart.

(4) Total gross income from cross-article corporation stock is the sum of net capital gains in excess of capital losses from the sale of cross-article stock plus gross exempt cross-article dividends.

(c) Other unitary corporation stock and related income.

(1) Other unitary corporation stock means investments in stock in a corporation that is conducting a unitary business with the taxpayer, but is not included in a combined report with the taxpayer. Other unitary corporation stock does not include cross-article stock.

(2) Gross exempt other unitary corporation dividends mean dividend income received from other unitary corporation stock, before the reduction for either (i) interest deductions directly or indirectly attributable to gross exempt other unitary corporation dividends as determined in section 3-4.7 of this Subpart or (ii) the safe harbor reduction amount determined in section 3-4.8 of this Subpart.

(3) Exempt other unitary corporation dividends means dividends from other unitary corporation stock less either (i) the interest deductions directly or indirectly attributable to gross exempt other unitary corporation dividends as determined in section 3-4.7 of this Subpart or (ii) the safe harbor reduction amount determined in section 3-4.8 of this Subpart.

(4) Total gross income from other unitary corporation stock is the sum of net capital gains in excess of capital losses from the sale of other unitary corporation stock plus gross exempt other unitary corporation dividends.

(d) General.

(1) Gross other exempt income is the sum of gross exempt CFC income, gross exempt cross-article dividends, and gross exempt other unitary corporation dividends.

(2) Other exempt income is the sum of exempt CFC income, exempt cross-article dividends, and exempt other unitary corporation dividends. Other exempt income cannot exceed entire net income.

(3) Gross other exempt income and other exempt income do not include any amounts treated as dividends pursuant to IRC section 78.

N.Y. Comp. Codes R. & Regs. Tit. 20 §§ 3-4.6

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