Qualified financial instrument apportionment rules for non-captive REITs and non-

# (a)

For purposes of this section, a “qualified financial instrument” means a financial instrument, other than a financial instrument listed in subdivision (b) of this section, that is of a type described in one of the following clauses of section 210-A(5)(a)(2): clause (A)—loans; clause (B)— state, and municipal debt; clause (C)—asset backed securities and other government agency debt; clause (D)—corporate bonds; clause (G)— dividends and net gains from sales of stock or partnership interests; clause (H)—other financial instruments;
clause (I)— commodities.

# (b)

The following financial instruments are not qualified financial instruments, even if they are of a type described in subdivision (a) of this section:

# (1)

a loan secured by real property;

# (2)

a financial instrument that is investment capital; and

# (3)

stock that generates other exempt income.

# (c)

Except as provided in subdivision (d) of this section, the amount of receipts, net income (not less than zero) and net gains (not less than zero) from qualified financial instruments included in New York receipts or everywhere receipts is determined using the customer sourcing method contained in section 210-A(5)(a)(2), and further described in this section.

# (d)

# (1)

Non-captive REITs and non-captive RICs may elect the fixed percentage method to include 8% of net income (not less than zero) from qualified financial instruments in New York receipts and 100% of net income (not less than zero) from qualified financial instruments in everywhere receipts. The election may be made whether or not such net income would otherwise be included in New York receipts or everywhere receipts pursuant to the provisions of section 210-A(5)(a)(2).

# (2)

Net income from qualified financial instruments is the sum of:
(i) net gains (not less than zero) from each type of qualified financial instrument that would be subject to the same customer sourcing method in section 210-A(5)(a)(2) and Part 4 of this Subchapter if not for the fixed percentage method;
(ii) net income (not less than zero) from each type of qualified financial instrument that would be subject to the same customer sourcing method in section 210-A(5)(a)(2) and Part 4 of this Subchapter, if not for the fixed percentage method; and
(iii) receipts from each type of qualified financial instrument.

# (3)

The fixed percentage method election must be made annually and must be made on an original, timely filed report, determined with regard to extensions for time for filing. Any fixed percentage method election made on a report that is filed late will be invalid and ineffective.

# (4)

Once the fixed percentage method election has been made in the manner required in paragraph (3) of this subdivision for a taxable year, it is binding on the taxpayer and the department for such taxable year and cannot be revoked or overridden.

# (e)

Example.
Corporation X is a non-captive RIC. It elects to use the fixed percentage method in the manner required by paragraph (3) of subdivision (d) of this section to determine the amount of its net income (not less than zero) from qualified financial instruments to include in New York receipts and everywhere receipts. Its income does not qualify as other exempt income or income from investment capital.
Corporation X has $1,000 in dividends from Stock A; ($200) loss from the sale of Stock B; $750 gain from the sale of corporate bond C, which was sold through a licensed exchange; $25,000 gain from the sale of corporate bond D, which was not sold through a registered securities broker or dealer or through a licensed exchange; $5,000 gain from the sale of debt obligation E, which was issued by Country Y; ($2,000) loss from the sale of debt obligation F, which was issued by Country Z; and $2,000 of interest from deposit accounts.
Corporation X has $31,750 of net income (not less than zero) from qualified financial instruments included in everywhere receipts broken down as follows:
• $1,000 of dividends from stock;
• $0 of gains from sales of stock (as the loss is limited to zero);
• $750 of gains from sales of bonds sold through a licensed exchange or registered securities broker or dealer;
• $25,000 of gains from sales of bonds not sold through a licensed exchange or registered securities broker or dealer;
• $3,000 of gains from one type of other financial instrument (debt obligations issued by a country, or political subdivision thereof, other than the United States); and
• $2,000 of interest from one type of other financial instrument (deposit accounts).
Corporation X includes $2,540 (8% multiplied by $31,750) from qualified financial instruments in its New York receipts and $31,750 in its everywhere receipts.