N.Y. General City Model Law § 4

Current through 2024 NY Law Chapters 1-59 and 61-121

Section 4 - Computation of tax

1.[Effective until 12/312026]The tax imposed by subdivision one of section three of this part shall be, in the case of each taxpayer: (a) a tax (1) for taxable years beginning on or after January first, nineteen hundred seventy-eight but before January first, nineteen hundred eighty-seven, computed at the rate of nine per centum, and for taxable years beginning on or after January first, nineteen hundred eighty-seven, computed at the rate of eight and eighty-five one hundredths per centum on its entire net income, or the portion thereof allocated within the city as hereinafter provided, subject to any modification required by paragraph (d) of subdivision three of this section, or (2) computed at one and one-half mills for each dollar of its total business and investment capital, or the portion thereof allocated within the city as hereinafter provided, except that in the case of a cooperative housing corporation as defined in the internal revenue code, the applicable rate shall be four-tenths of one mill, or (3) for taxable years beginning on or after January first, nineteen hundred seventy-eight but before January first, nineteen hundred eighty-seven, computed at the rate of nine per centum, and for taxable years beginning on or after January first, nineteen hundred eighty-seven, computed at the rate of eight and eighty-five one hundredths per centum on thirty per centum of the taxpayer's entire net income plus salaries and other compensation paid to the taxpayer's elected or appointed officers and to every stockholder owning in excess of five per centum of its issued capital stock minus fifteen thousand dollars (except as hereinafter provided) and any net loss for the reported year, or on the portion of such sum allocated within the city as hereinafter provided for the allocation of entire net income, subject to any modification required by paragraph (d) of subdivision three of this section, or (4) one hundred twenty-five dollars, whichever is the greatest, plus (b) a tax computed at the rate of three-quarters of a mill for each dollar of the portion of its subsidiary capital allocated within the city as hereinafter provided. In the case of a taxpayer which is not subject to tax for an entire year, or which elects to compute its tax pursuant to paragraph (b) of subdivision six of section three, the exemption allowed in clause three of paragraph (a) shall be prorated according to the period such taxpayer was subject to tax or, in the case of such an election, the period for which its entire net income is determined pursuant to such paragraph (b) of subdivision six of section three.

1.[Effective 12/31/2026]The tax imposed by subdivision one of section three of this part shall be, in the case of each taxpayer: (a) a tax (1) computed at the rate of five and one-half per centum, or as an alternative for taxable years beginning on or after January first, nineteen hundred seventy-one, at the rate of six and seven-tenths per centum, on its entire net income, or the portion thereof allocated within the city as hereinafter provided, subject to any modification required by paragraph (d) of subdivision three of this section, or (2) computed at one mill for each dollar of its total business and investment capital, or the portion thereof allocated within the city as hereinafter provided, except that in the case of a cooperative housing corporation as defined in the internal revenue code, the applicable rate shall be one-quarter of one mill, or (3) computed at the rate of five and one-half per centum, or as an alternative for taxable years beginning on or after January first, nineteen hundred seventy-one, at the rate of six and seven-tenths per centum, on thirty per centum of the taxpayer's entire net income plus salaries and other compensation paid to the taxpayer's elected or appointed officers and to every stockholder owning in excess of five per centum of its issued capital stock minus fifteen thousand dollars (except as hereinafter provided) and any net loss for the reported year, or on the portion of such sum allocated within the city as hereinafter provided for the allocation of entire net income, subject to any modification required by paragraph (d) of subdivision three of this section, or (4) twenty-five dollars, whichever is the greatest, plus (b) a tax computed at the rate of one-half mill for each dollar of the portion of its subsidiary capital allocated within the city as hereinafter provided. In the case of a taxpayer which is not subject to tax for an entire year, or which elects to compute its tax pursuant to paragraph (b) of subdivision six of section three, the exemption allowed in clause three of paragraph (a) shall be prorated according to the period such taxpayer was subject to tax or, in the case of such an election, the period for which its entire net income is determined pursuant to such paragraph (b) of subdivision six of section three.

2.The amount of subsidiary capital, investment capital and business capital shall each be determined by taking the average fair market value of the gross assets included therein (less, in the case of business capital, average liabilities deductible therefrom which are payable by their terms on demand or within one year from the date incurred, other than loans or advances outstanding for more than a year as of any date during the year covered by the report), and, if the period covered by the report is other than a period of twelve calendar months, by multiplying such value by the number of calendar months or major parts thereof included in such period, and dividing the product thus obtained by twelve.

3.The portion of the entire net income of a taxpayer to be allocated within the city shall be determined as follows:

(a) multiply its business income by a business allocation percentage to be determined by

(1) ascertaining the percentage which the average value of the taxpayer's real and tangible personal property within the city during the period covered by its report bears to the average value of all the taxpayer's real and tangible personal property wherever situated during such period;

(2) ascertaining the percentage which the receipts of the taxpayer, computed on the cash or accrual basis according to the method of accounting used in the computation of its entire net income, arising during such period from

(A) sales of its tangible personal property located within the city at the time of the receipt of or appropriation to the orders, where shipments are made to points within the city,

(B) sales of its tangible personal property not located at the time of the receipt of or appropriation to the orders at any permanent or continuous place of business maintained by the taxpayer without the city where the orders were received or accepted within the city and where shipments are made to points within the city,

(C) sales of its tangible personal property located within the city at the time of the receipt of or appropriation to the orders where shipment is made to points outside of the city and sales of its tangible personal property (except sales described in clause (B)) located without the city at the time of the receipt of or appropriation to the orders where shipment is made to points within the city, but only to the extent of fifty per centum of the receipts from the sales referred to in this clause,

(D) sales of its tangible personal property not located at the time of the receipt of or appropriation to the orders at any permanent or continuous place of business maintained by the taxpayer without the city, where the orders were received or accepted within the city and where shipment is made between points outside the city, but only to the extent of fifty per centum of the receipts from the sales referred to in this clause. For purposes of this clause and clause (B) an order shall be deemed received or accepted within the city if it has been received or accepted by an employee, agent, agency or independent contractor chiefly situated at, connected with, by contract or otherwise, or sent out from a permanent or continuous place of business of the taxpayer within the city,

(E) services performed within the city,

(F) rentals from property situated and royalties from the use of patents or copyrights, within the city, and

(G) all other business receipts earned within the city, bear to the total amount of the taxpayer's receipts, similarly computed, arising during such period from all sales of its tangible personal property, services, rentals, royalties and all other business transactions, whether within or without the city;

(3) ascertaining the percentage of the total wages, salaries and other personal service compensation, similarly computed, during such period of employees within the city, except general executive officers, to the total wages, salaries and other personal service compensation, similarly computed, during such period of all the taxpayer's employees within and without the city, except general executive officers, and

(4) adding together the percentages so determined and dividing the result by the number of percentages; provided, however, that if the taxpayer does not have a regular place of business outside the city other than a statutory office, the business allocation percentage shall be one hundred per centum; and

(b) multiply its investment income by an investment allocation percentage to be determined by

(1) multiplying the amount of its investment capital invested in each stock, bond or other security (other than governmental securities) during the period covered by its report by the percentage, if any, of the entire capital or the issued capital stock, or the gross direct premiums, or the net income, as the case may be, of the issuer or obligor thereof required to be allocated within the city on the report or reports, if any, required of any such issuer or obligor under part II, part III, part IV, or part V or under a local law of the city imposing a tax on utilities for the preceding year, provided, however, that for taxable years ending in or with calendar year nineteen hundred sixty-six, such percentage shall be presumed to be that percentage, if any, of the entire capital or the issued capital stock, or the gross direct premiums, or the net income, as the case may be, of the issuer or obligor thereof required to be allocated within the state on the report or reports, if any, required of any such issuer or obligor under the tax law or the insurance law for the preceding year, unless the taxpayer establishes the actual percentage which such issuer or obligor would have been required to allocate within the city had part II, part III, part IV, or part V been in effect for such year, or which such issuer or obligor did allocate within the city under a local law of the city imposing a tax on utilities, but without regard to any minimum,

(2) adding together the sum so obtained, and

(3) dividing the result so obtained by the total of its investment capital invested during such period in stocks, bonds and other securities (other than obligations of the United States and its instrumentalities and obligations of the state of New York, its political subdivisions and its instrumentalities); provided, however, that in case any investment capital is invested in any stock, bond or other security during only a portion of the period covered by the report, only such portion of such capital shall be taken into account; and provided further, that if a taxpayer's investment allocation percentage is zero, interest received on bank accounts, on obligations of the United States and its instrumentalities and on obligations of the state of New York, its political subdivisions and its instrumentalities shall be multiplied by its business allocation percentage; and

(c) add the products so obtained.

(d) At the election of the taxpayer there shall be deducted from the portion of its entire net income allocated within the city either or both of the items set forth in subparagraphs one and two of this paragraph, except that only one of such deductions shall be allowed with respect to any one items of property.

(1) Depreciation with respect to any property such as described in subparagraph three of this paragraph, not exceeding twice the depreciation allowed with respect to the same property for federal income tax purposes. Such deduction shall be allowed only upon condition that entire net income be computed without any deduction for the depreciation of the same property, and the total of all deductions allowed pursuant to the preceding sentence in any taxable year or years with respect to any property shall not exceed its cost or other basis.

(2) Expenditures paid or incurred during the taxable year for the construction, reconstruction, erection or acquisition of any property such as described in subparagraph three of this paragraph which is used or to be used for purposes of research and development in the experimental or laboratory sense. Such purposes shall not be deemed to include the ordinary testing or inspection of materials or products for quality control, efficiency surveys, management studies, consumer surveys, advertising, promotions or research in connection with literary, historical or similar projects. Such deduction shall be allowed only on condition that entire net income for the taxable year and all succeeding taxable years be computed without the deduction of any such expenditures and without any deduction for depreciation of the same property, except to the extent that its basis may be attributable to factors other than such expenditures, or in case a deduction is allowable pursuant to this subparagraph for only a part of such expenditures, on condition that any deduction allowed for federal income tax purposes on account of such expenditures or on account of depreciation of the same property be proportionately reduced in computing entire net income for the taxable year and all succeeding taxable years. With respect to property which is used or to be used for research and development only in part, or during only part of its useful life, a proportionate part of such expenditures shall be deductible. If all or part of such expenditures with respect to any property shall have been deducted as provided herein, and such property is used for purposes other than research and development to a greater extent than originally reported, the taxpayer shall report such use in its report for the first taxable year during which it occurs, and the director of finance may recompute the tax for the year or years for which such deduction was allowed, and may assess any additional tax resulting from such recomputation regardless of the time limitations set forth in section seventy-four of this title.

(3) Such deductions shall be allowed only with respect to tangible property which is depreciable pursuant to section one hundred sixty-seven of the internal revenue code, having a situs in the city and used in the taxpayer's trade or business, (A) the construction, reconstruction or erection of which is completed after December thirty-first, nineteen hundred sixty-five, and then only with respect to that portion of the basis thereof or the expenditures relating thereto which is properly attributable to such construction, reconstruction or erection after December thirty-first, nineteen hundred sixty-five, or (B) acquired after December thirty-first, nineteen hundred sixty-five by purchase as defined in section one hundred seventy-nine (d) of the internal revenue code, if the original use of such property commenced with the taxpayer, commenced in the city and commenced after such date.

(4) If the deductions allowable for any taxable year, pursuant to this subdivision, exceed the portion of the taxpayer's entire net income allocated to the city for such year, the excess may be carried over to the following taxable year or years and may be deducted from the portion of the taxpayer's entire net income allocated to the city for such year or years.

(5) In any taxable year when property is sold or otherwise disposed of, with respect to which a deduction has been allowed pursuant to subparagraph one or two of this paragraph, the gain or loss thereon entering into the computation of federal taxable income shall be disregarded in computing entire net income, and there shall be added to or subtracted from the portion of entire net income allocated within the city the gain or loss upon such sale or other disposition. In computing such gain or loss the basis of the property sold or disposed of shall be adjusted to reflect the deduction allowed with respect to such property pursuant to subparagraph one or two of this paragraph. Provided, however, that no loss shall be recognized for the purposes of this subparagraph with respect to a sale or other disposition of property to a person whose acquisition thereof is not a purchase as defined in section one hundred seventy-nine (d) of the internal revenue code.

4.The portion of the business capital of a taxpayer to be allocated within the city shall be determined by multiplying the amount thereof by the business allocation percentage determined as hereinabove provided.

5.The portion of the investment capital of a taxpayer to be allocated within the city shall be determined by multiplying the amount thereof by the investment allocation percentage determined as hereinabove provided.

6.Any taxpayer not taxed upon the basis of a combined report, the investment income of which is less than twenty-five per centum of its entire net income and the investment capital of which is less than twenty-five per centum of its total business and investment capital, may at its election apply its business allocation percentage to its entire net income and its total business and investment capital. Any taxpayer not taxed upon the basis of a combined report, the investment income of which is more than eighty-five per centum of its entire net income and the investment capital of which is more than eighty-five per centum of its total business and investment capital, may at its election apply its investment allocation percentage to its entire net income and its total business and investment capital. Any taxpayer not taxed upon the basis of a combined report, the subsidiary capital of which (computed without regard to this sentence) is more than eighty-five per centum of its total capital, exclusive of cash on hand and on deposit, obligations of the United States and its instrumentalities and obligations of the state of New York, its political subdivisions and its instrumentalities, may at its election treat as subsidiary capital a proportion of such cash and obligations not in excess of the proportion of its subsidiary capital (so computed) to its total capital.

7.The portion of the subsidiary capital of a taxpayer to be allocated within the city shall be determined by (a) multiplying the amount of its subsidiary capital invested in each subsidiary during the period covered by its report (or, in the case of any such capital so invested during only a portion of such period, such portion of such capital) by the percentage, if any, of the entire capital or the issued capital stock, or the gross direct premiums, or the net income, as the case may be, of such subsidiary required to be allocated within the city on the report or reports, if any, required of such subsidiary under this title for the preceding year, or which would have been required for such year had this title been in effect, but without regard to any minimum, (b) multiplying the proportion of cash and obligations of the United States and its instrumentalities and obligations of the state of New York, its political subdivisions and its instrumentalities treated as subsidiary capital, by the weighted average of the percentages used in clause (a) hereof, and (c) adding together the sums so obtained.

8.If it shall appear to the director of finance that any business or investment allocation percentage determined as hereinabove provided does not properly reflect the activity, business, income or capital of a taxpayer within the city, the director of finance shall be authorized in his discretion, in the case of a business allocation percentage, to adjust it by (a) excluding one or more of the factors therein, (b) including one or more other factors, such as expenses, purchases, contract values (minus subcontract values), (c) excluding one or more assets in computing such allocation percentage, provided the income therefrom is also excluded in determining entire net income, or (d) any other similar or different method calculated to effect a fair and proper allocation of the income and capital reasonably attributable to the city, and in the case of an investment allocation percentage to adjust it by excluding one or more assets in computing such percentage provided the income therefrom is also excluded in determining entire net income. The director of finance from time to time shall publish all rulings of general public interest with respect to any application of the provisions of this subdivision.

9.If it shall appear to the director of finance that any business allocation percentage determined as hereinabove provided does not properly reflect the activity, business, income or capital of a taxpayer within the city, the director of finance shall be authorized in his discretion to adjust it by (a) excluding one or more of the factors therein, (b) including one or more other factors, such as expenses, purchases, contract values (minus subcontract values), (c) excluding one or more assets in computing such allocation percentage, provided the income therefrom is also excluded in determining entire net income, or (d) any other similar or different method calculated to effect a fair and proper allocation of the income and capital reasonably attributable to the city, and in the case of an investment allocation percentage, to adjust it by excluding one or more assets in computing such percentage provided the income therefrom is also excluded in determining entire net income. The director of finance from time to time shall publish all rulings of general public interest with respect to any application of the provisions of this subdivision.

10.For purposes of this section the taxpayer's real property shall include not only such property owned by the taxpayer but also such property rented to it.

N.Y. General City Model Law § 4

Amended by New York Laws 2023, ch. 345,Sec. 13, eff. 8/23/2023.

Amended by New York Laws 2020, ch. 58,Sec. XXX-G-13, eff. 4/3/2020.