20 NYCRR § 4-1.2

General rules for apportionment

Official textus-ny/regstax.ny.gov17 subsections

# (a)

All corporations must apportion within and without New York State their total business income and business capital by a business apportionment factor (BAF) that is a fraction. The numerator and denominator of the BAF includes only those receipts, net income, net gains, and other items described in section 210-A and this Subchapter that are included in the computation of entire net income for the taxable year. The numerator of the BAF is the sum of all amounts required to be included in the numerator pursuant to section 210-A and this Subchapter (New York receipts) and the denominator of the BAF is the sum of all amounts required to be included in the denominator pursuant to section 210-A and this Subchapter (everywhere receipts).

# (b)

The following amounts shall not be included in either New York receipts or everywhere receipts:

# (1)

gross income from investment capital, even if such income is included in business income pursuant to the 8% of entire net income (ENI) limitation on gross investment income.

# (2)

any portion of gross other exempt income generated by stock that is not marked to market.

# (3)

any portion of gross other exempt income generated by stock that is marked to market in instances where the taxpayer did not make the fixed percentage election for qualified financial instruments.

# (4)

amounts specified in section 208(9)(a) to be subtracted from federal taxable income in the computation of ENI (other than the subtractions for qualified banks provided for in section 208(9)(a)(19)).

# (5)

amounts specified in section 208(9)(b) to be added back to federal taxable income in the computation of ENI (other than the addition modification for alien corporations not deemed domestic under any provision of the IRC provided for in section 208(9)(b)(1) and the addition modification for dividends or interest provided for in section 208(9)(b)(2)).

# (6)

certain reimbursements of expenses paid for by the corporation on behalf of a customer that are received from the customer in advance or received from the customer and placed by the corporation into a separate account, provided the reimbursement does not exceed the amount of expenses, and does not exceed reimbursements received by the corporation under a cost-sharing arrangement the corporation has with another company where that cost-sharing arrangement does not include any mark-up of the expense. In the case of a cost-sharing arrangement that the corporation has with another company that includes a mark-up of expenses, only the amount of the mark-up shall be included in business receipts.

# (c)

Example.
Corporation A is a professional employer organization (“PEO”). It contracts with its customers to provide a number of services, including the handling of the payment of wages, the withholding of the employees’ and customers’ necessary statutory taxes and unemployment insurance payments, and the remitting of such taxes and unemployment insurance payments to the Department and the Department of Labor. In order to provide these services, the PEO may have to pay out of its own account the wages of the employees and other expenses before it is reimbursed by its customers from funds in a dedicated account set up on behalf of its customers for those wages and other expenses. The amount reimbursed does not exceed the amount of expenses. These reimbursements are not considered business receipts and, therefore, are not included in New York receipts or everywhere receipts.

# (d)

All business receipts for the period covered by the report, computed on a cash or accrual basis according to the method of accounting used in the computation of its ENI, must be taken into account.

# (e)

New York and everywhere receipts shall be computed using the rules in section 210-A and this Subchapter. For certain types of receipts, the provisions of this Subchapter provide further guidance. Such rules shall be applied to each receipt, item of income, gain, or other item described in section 210-A except as otherwise provided.

# (f)

A corporation’s method of apportioning its receipts must reflect an attempt to comply with the regulatory standards set forth herein rather than an attempt to minimize the corporation’s tax liability.

# (g)

A corporation’s application of the regulatory standards set forth in this Subchapter must be based on objective criteria and should consider all sources of information reasonably available to the corporation at the time of filing its original tax return, including, without limitation, the corporation’s books and records, including its contracts or agreements with its customers, kept in the ordinary course of business. Corporations may, in good faith, rely on information provided by their customers.

# (h)

A corporation’s method of sourcing its receipts must be determined in good faith, applied in good faith, and applied consistently with respect to similar transactions.

# (i)

A corporation must retain records that explain the determination and application of its method of sourcing its receipts used in completing the return, including its underlying assumptions, and must provide such records to the commissioner upon request.

# (j)

A corporation must take reasonable steps to update its existing systems of recording transactions or the current format of its books and records to capture the information required by these rules. It is not sufficient to rely on the fact that existing systems do not adequately capture the required information.

# (k)

In determining the amount of New York receipts, the corporation must consider the location during the entire time period in which the activity generating the receipts occurs.

Source: official source document (DTF adopted rule text, December 2023 corporate reform)

In this part (40 sections)

Full table of contents →