N.Y. Comp. Codes R. & Regs. Tit. 20 §§ 5-1.4

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

Section 5-1.4 - Re-computation of investment tax credit on property disposed of or property that ceases to qualify

(Tax Law, section 210-B(1))

(a) If property on which investment tax credit has been claimed is disposed of or ceases to be in qualified use prior to the end of its useful life, the difference between the credit taken and the credit allowed for actual use must be added back to the tax otherwise due in the year of disposition or disqualification.

(b) The amount of investment tax credit to be added back is computed as follows:

(1) divide the total number of months in qualified use of the property by the total number of months of useful life;

(2) multiply the amount computed in paragraph (1) of this subdivision by the amount of the credit claimed on the property to ascertain the credit allowed for actual use;

(3) subtract the credit allowed for actual use from the credit claimed on the property to determine the amount of investment tax credit to be added back; and

(4) add the amount to be added back to the tax due for the year the property was disposed of or ceases to qualify.

(c) A disposition of qualified property includes:

(1) a sale of the property;

(2) a liquidation other than as part of a statutory merger or consolidation; see subdivision (e) of this section for the exception;

(3) a legal dissolution of the corporation;

(4) a trade-in of the property;

(5) a gift of the property;

(6) transfer upon foreclosure of a security interest in the property;

(7) retirement of the property before expiration of its useful life;

(8) condemnation of the property;

(9) loss of the property due to fire, theft, storm or other casualty; and

(10) transfer of the property to a corporation not taxable under article 9-A.

(d) Property that ceases to be in qualified use includes:

(1) property that initially qualified, but no longer meets the requirements of section 5-1.2 (a) of this Subpart, such as property that no longer has situs in New York State or property that no longer is used in the production of goods; and

(2) property on which a credit was allowed that was subsequently leased to others.

(e) For purposes of this section, a disposition does not occur where property is transferred from a corporation as part of a transaction to which IRC section 381(a) applies: e.g., a complete liquidation of a subsidiary under I R C section 332, or a reorganization under I R C section 361 and I R C section 368 (a)(1)(A) (statutory merger or consolidation), IRC section 368 (a)(1)(C) (certain acquisitions of property from one corporation by another), IRC section 368 (a)(1)(D) (certain transfers of as sets), I R C section 368 (a)(1)(F) (mere change in identity, form or place of organization, however effected) or IRC section 368 (a)(1)(G) (bankruptcy reorganizations). As there is no disposition in these cases, an add back is not required provided that the property continues in qualified use and is acquired by a corporation subject to tax under article 9-A. Generally, in these cases, the acquiring or surviving corporation cannot claim an investment tax credit because it takes over such property at the adjusted basis of the transferor and the transfer therefore does not qualify as a purchase pursuant to IRC section 179(d)(2). If the property in the hands of the acquiring corporation is not in qualified use for its entire life or for more than 12 consecutive years, a recovery from the acquiring corporation is required. In measuring the period of qualified use, the period during which the property was held by the transferor corporation and the acquiring corporation are to be taken into account.

(f) There is no add-back of the investment tax credit if the property is disposed of or ceases to be in qualified use after it has been in qualified use for more than 12 consecutive years or after the end of its useful life.

(g) As used in this section, the useful life of property shall be the same number of years as the corporation uses for Federal depreciation purposes.

(h) If property that qualifies for the investment tax credit is disposed of or ceases to be in qualified use prior to the end of the taxable year in which the credit is to be taken, an investment tax credit is allowed for the period the property was in qualified use. The credit that will be allowed is that part of the credit that would have been allowed for the entire taxable year multiplied by a fraction, the numerator of which is the total number of months in qualified use of the property and the denominator of which is the total number of months of the property's useful life.

N.Y. Comp. Codes R. & Regs. Tit. 20 §§ 5-1.4

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