N.Y. Tax Law § 40 — The tax-free NY area tax elimination credit

§ 40. The tax-free NY area tax elimination credit. (a) Allowance of\ncredit. A taxpayer that is a business or owner of a business in the case\nof a business taxed as a sole proprietorship, partnership or New York S\ncorporation, that is located in a tax-free NY area approved pursuant to\narticle twenty-one of the economic development law and is subject to tax\nunder article nine-A, or twenty-two of this chapter, shall be allowed a\ncredit against such tax, pursuant to the provisions referenced in\nsubdivision (e) of this section, to be computed as hereinafter provided.\n (b) Amount of credit. The amount of the credit shall be the product\nof: (1) the tax-free area allocation factor; and (2) the tax factor.\n (c) Tax-free area allocation factor. The tax-free area allocation\nfactor shall be the percentage representing the business's economic\npresence in the tax-free NY area in which the business was approved to\nlocate pursuant to article twenty-one of the economic development law.\nThis percentage shall be computed by:\n (1) ascertaining the percentage that the average value of the\nbusiness's real and tangible personal property, whether owned or rented\nto it, in the tax-free NY area in which the business was located during\nthe period covered by the taxpayer's report or return bears to the\naverage value of the business's real and tangible personal property,\nwhether owned or rented to it, within the state during such period;\nprovided that the term "value of the business's real and tangible\npersonal property" shall have the same meaning as such term has in\nparagraph (a) of subdivision two of section two hundred nine-B of this\nchapter; and\n (2) ascertaining the percentage that the total wages, salaries and\nother personal service compensation, similarly computed, during such\nperiod of employees, except general executive officers, employed at the\nbusiness's location in the tax-free NY area, bears to the total wages,\nsalaries and other personal service compensation, similarly computed,\nduring such period, of all the business's employees within the state,\nexcept general executive officers; and\n (3) adding together the percentages so determined and dividing the\nresult by two.\n For purposes of article twenty-two of this chapter, references in this\nsubdivision to property, wages, salaries and other personal service\ncompensation shall be deemed to be references to such items connected\nwith the conduct of a business.\n (d) Tax factor. (1) General. The tax factor shall be, in the case of\narticle nine-A of this chapter, the largest of the amounts of tax\ndetermined for the taxable year under paragraphs (a) through (d) of\nsubdivision one of section two hundred ten of such article after the\ndeduction of any other credits allowable under such article. The tax\nfactor shall be, in the case of article twenty-two of this chapter, the\ntax determined for the taxable year under subsections (a) through (d) of\nsection six hundred one of such article after the deduction of any other\ncredits allowable under such article.\n (2) Sole proprietors, partners and S corporation shareholders. (A)\nWhere the taxpayer is a sole proprietor of a business located in a\ntax-free NY area, the taxpayer's tax factor shall be that portion of the\namount determined in paragraph one of this subdivision that is\nattributable to the income of the business at its location in the\ntax-free NY area. Such attribution shall be made in accordance with the\nratio of the taxpayer's income from such business allocated within the\nstate, entering into New York adjusted gross income, to the taxpayer's\nNew York adjusted gross income, or in accordance with such other methods\nas the commissioner may prescribe as providing an apportionment that\nreasonably reflects the portion of the taxpayer's tax attributable to\nthe income of such business. In no event may the ratio so determined\nexceed 1.0. The income from such business allocated within the state\nshall be determined as if the sole proprietor was a non-resident.\n (B)(i) Where the taxpayer is a member of a partnership that is a\nbusiness located in a tax-free NY area, the taxpayer's tax factor shall\nbe that portion of the amount determined in paragraph one of this\nsubdivision that is attributable to the income of the partnership. Such\nattribution shall be made in accordance with the ratio of the partner's\nincome from the partnership allocated within the state to the partner's\nentire income, or in accordance with such other methods as the\ncommissioner may prescribe as providing an apportionment that reasonably\nreflects the portion of the partner's tax attributable to the income of\nthe partnership. In no event may the ratio so determined exceed 1.0. The\nincome from the partnership allocated within the state shall be\ndetermined as if any of the partners was a non-resident.\n (ii) For purposes of article nine-A of this chapter, the term\n"partner's income from the partnership" means partnership items of\nincome, gain, loss and deduction, and New York modifications thereto,\nentering into business income and the term "partner's entire income"\nmeans business income, allocated within the state. For purposes of\narticle twenty-two of this chapter, the term "partner's income from the\npartnership" means partnership items of income, gain, loss and\ndeduction, and New York modifications thereto, entering into New York\nadjusted gross income, and the term "partner's entire income" means New\nYork adjusted gross income.\n (C) (i) Where the taxpayer is a shareholder of a New York S\ncorporation that is a business located in a tax-free NY area, the\nshareholder's tax factor shall be that portion of the amount determined\nin paragraph one of this subdivision that is attributable to the income\nof the S corporation. Such attribution shall be made in accordance with\nthe ratio of the shareholder's income from the S corporation allocated\nwithin the state, entering into New York adjusted gross income, to the\nshareholder's New York adjusted gross income, or in accordance with such\nother methods as the commissioner may prescribe as providing an\napportionment that reasonably reflects the portion of the shareholder's\ntax attributable to the income of such business. The income of the S\ncorporation allocated within the state shall be determined by\nmultiplying the income of the S corporation by a business allocation\nfactor that shall be determined in clause (ii) of this subparagraph. In\nno event may the ratio so determined exceed 1.0.\n (ii) The business allocation factor for purposes of this subparagraph\nshall be computed by adding together the property factor specified in\nsubclause (I) of this clause, the wage factor specified in subclause\n(II) of this clause and the apportionment factor determined under\nsection two hundred ten-A of this chapter and dividing by three.\n (I) The property factor shall be determined by ascertaining the\npercentage that the average value of the business's real and tangible\npersonal property, whether owned or rented to it, within the state\nduring the period covered by the taxpayer's report or return bears to\nthe average value of the business's real and tangible personal property,\nwhether owned or rented to it, within and without the state during such\nperiod; provided that the term "value of the business's real and\ntangible personal property" shall have the same meaning as such term has\nin paragraph (a) of subdivision two of section two hundred nine-B of\nthis chapter.\n (II) The wage factor shall be determined by ascertaining the\npercentage that the total wages, salaries and other personal service\ncompensation, similarly computed, during such period of employees,\nexcept general executive officers, employed at the business's location\nor locations within the state, bears to the total wages, salaries and\nother personal service compensation, similarly computed, during such\nperiod, of all the business's employees within and without the state,\nexcept general executive officers.\n (3) Combined returns or reports. (A) Where the taxpayer is a business\nlocated in a tax-free NY area and is required or permitted to make a\nreturn or report on a combined basis under article nine-A of this\nchapter, the taxpayer's tax factor shall be the amount determined in\nparagraph one of this subdivision that is attributable to the income of\nsuch business. Such attribution shall be made in accordance with the\nratio of the business's income allocated within the state to the\ncombined group's income, or in accordance with such other methods as the\ncommissioner may prescribe as providing an apportionment that reasonably\nreflects the portion of the combined group's tax attributable to the\nincome of such business. In no event may the ratio so determined exceed\n1.0.\n (B) The term "income of the business located in a tax-free NY area"\nmeans business income calculated as if the taxpayer was filing\nseparately and the term "combined group's income" means business income\nas shown on the combined report, allocated within the state.\n (4) If a business is generating or receiving income from a line of\nbusiness or intangible property that was previously conducted, created\nor developed by the business or a related person, as that term is\ndefined in section four hundred thirty-one of the economic development\nlaw, the tax factor specified in this subdivision shall be adjusted to\ndisregard such income.\n (e) Cross-references. For application of the credit provided for in\nthis section, see the following provisions of this chapter:\n (1) Article 9-A: section 210-B, subdivision 41.\n (2) Article 22: section 606, subsection (i), paragraph (1),\nsubparagraph (B), clause (xxxvi).\n (3) Article 22: section 606, subsection (ww).\n