20 NYCRR § 9-2.4

Computation of tax under the entity method

Official textus-ny/regstax.ny.gov

# (a)

Under the entity method, for purposes of determining the taxes measured by the business income base, capital base, and the fixed dollar minimum, a corporate partner is treated as owning an interest in the partnership entity. The partner's interest in the partnership is an intangible asset that is business capital.

# (b)

Business income base.

# (1)

To the extent a corporation's entire net income (ENI) includes its distributive share of partnership items of income, gain, loss and deduction, such items will be treated as business income. The corporation's distributive share of such partnership items must be apportioned as provided in subdivision (e) of this section and included in the corporation's apportioned business income.

# (2)

While a corporation may have the information concerning one or more of the modifications set forth in section 208(9), such as state bond interest, a corporation using the entity method does not have all the information necessary to properly compute its article 9-A tax using the aggregate method. Therefore, no modifications should be made with respect to any partnership items.

# (c)

Capital base. The corporation's interest in a partnership is business capital and is apportioned as provided in subdivision (e) of this section. The corporation's interest in the partnership is the value shown on its books and records kept in accordance with generally accepted accounting principles. If the interest is a marketable security, it is valued at fair market value (FMV). The capital base does not include any other amounts that the corporation may have included on its balance sheet with respect to its interest in the partnership.

# (d)

Fixed dollar minimum. The corporation does not take into account any partnership items in determining its fixed dollar minimum tax.

# (e)

A corporation must apportion its distributive share of partnership items of income, gain, loss and deduction included in its business income and its interest in the partnership included in its business capital by its BAF determined under Part 4 of this Subchapter, computed without regard to its distributive share of any partnership items of income, gain, loss or deduction. In addition, the MCTD apportionment percentage determined under Part 8 of this Subchapter must be computed without regard to its distributive share or proportionate part, as the case may be, of any partnership items.

# (f)

Because the corporation is treated as owning an intangible asset, it is not entitled to claim any portion of any tax credit that would be computed at the partnership level.

# (g)

Example.
Corporation X is a partner in Partnership P. For state tax purposes, the only information Corporate Partner X receives from Partnership P is a statement that lists its proportionate share of New York State income (loss), as well as state source income for other states in which Partnership P operates. The statement does not specify how the state source amounts were computed, nor does it confirm that the New York article 9-A rules were used to compute the New York amount. Therefore, Corporate Partner X does not have the necessary information to properly compute its article 9-A tax using the aggregate method, and it must compute its tax using the entity method. As such, the specific information provided by Partnership P about New York State income (loss) must be disregarded. To compute its tax under article 9-A, Corporate Partner X must include its total distributive share of income, gain, loss and deduction from Partnership P as business income. The amount of such amounts from Partnership P are then multiplied by a BAF computed without regard to the amounts from Partnership P.

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

In this part (21 sections)

Full table of contents →