20 NYCRR § 4-4.4

General rule for determining where the benefit is received

Official textus-ny/regstax.ny.gov11 subsections

Unless the corporation meets the specific criteria and has sufficient information necessary to apply the special rules in section 4-4.3 of this Subpart, determining where the benefit is received depends on whether the customer is an individual customer, a business customer or a passive investment customer.

# (a)

Individual customer. In the case where the corporation’s customer is an individual, the benefit of the service or other business activity is presumed to be received at the customer’s billing address. If the corporation does not have the customer’s billing address, it must use reasonable approximation.

# (b)

Business customer.

# (1)

Except in instances where the business address presumption applies, the benefit of the service or other business activity is presumed to be received in New York, without regard to the billing address of the corporation’s customer, if the customer receives the benefit of the service or other business activity in New York.

# (2)

The benefit can be received at the location of a third party (e.g., the consumer) only in the case of an intermediary transaction. A third party does not include the customer’s employees, agents, officers, partners (in the case of a partnership), managing members (in the case of a limited liability company), or shareholders (in the case of a New York S corporation).

# (3)

Benefit received both within and without New York State. Where the customer receives the benefit in New York and at least one other location, the corporation should apportion the receipts based on the percentage of value derived by the customer in each location where benefit is received.

# (c)

Passive investment customer.

# (1)

Receipts for management, distribution, and administration services provided to a passive investment customer are apportioned under the rules provided for in this subdivision unless a special rule for determining where the benefit is received is applicable. Such receipts include amounts received directly from a passive investment customer as well as amounts received from the investors in such passive investment customer, in their capacity as such.

# (2)

(i) The benefit of management, distribution, and administration services provided to a passive investment customer is presumed to be received at the location of the investors in such passive investment customer unless the investor is holding the interest in the passive investment customer for a beneficial owner. If the investor is holding the interest in the passive investment customer for a beneficial owner, the benefit of such services is presumed to be received at the location of the beneficial owner.
(ii) The location of an individual investor or beneficial owner is its billing address. The location of an investor or beneficial owner that is not an individual is the investor’s or beneficial owner’s principal place of business. Provided, if the corporation does not know the principal place of business, the location is the investor or beneficial owner’s billing address.
(iii) Management, distribution and administration services provided to a passive investment customer are apportioned to this state in proportion to the average value of the interests in the passive investment customer held by the passive investment customer’s investors and beneficial owners located in this state. To calculate the average value of the interests in the passive investment customer, add the percentage of the value of the interests held by investors and beneficial owners located in this state at the beginning of the taxable year to the percentage of the value of the interests held by investors and beneficial owners located in this state at the end of the taxable year, and divide by two.

# (3)

If the corporation cannot determine the location in paragraph (2) of this subdivision, the benefit of management, distribution, and administration services provided to a passive investment customer is presumed to be received at the location where the contract for such services is managed by the passive investment customer.

# (4)

For purposes of this subdivision, the following terms shall have the following meaning:
(i) “Administration services” includes clerical, accounting, bookkeeping, data processing, internal auditing, legal and tax services performed for a passive investment customer, but only if the provider of such service or services during the taxable year in which such service or services are sold also sells management or distribution services, as defined in this paragraph, to such passive investment customer.
(ii) “Beneficial owners” means any person who made an independent decision to invest. For purposes of this definition, “independent decision to invest” means a decision to invest made by a person who was not required or committed to do so by contract, agreement, or any other arrangement, understanding, or relationship except pursuant to law. The following are not beneficial owners for purposes of this definition:
(a) Master funds, feeder funds, and similar entities that pool investors’ assets. Master fund entities and feeder fund entities do not make independent decisions to invest because they are required by agreement with their limited partners, feeder funds, or other investors to invest.
(b) A shareholder of a publicly-traded corporation whose board decides to invest the corporation’s excess capital into an investment vehicle. The corporation, not the shareholder, makes the independent decision to invest in an investment vehicle.
(c) A participant in a defined benefit plan. Because participants have no control over whether to invest in the defined benefit plan they are not beneficial owners.
(iii) “Distribution services” means the services of advertising, servicing investor accounts (including redemptions), and marketing or selling interests in a passive investment customer.
(iv) “Management services” means the rendering of investment advice to a passive investment customer, making determinations as to when sales and purchases of securities are to be made on behalf of a passive investment company, or the selling or purchasing of securities constituting assets of a passive investment customer, and related activities, but only where such activity or activities are performed pursuant to a contract with the passive investment customer.

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

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