Sec. 3-2.9. Adjusting entire net income to period covered by report

Tax Law, § 208(9)(h)

(a) Except as provided for in subdivision (e) of this section, if the entire net income required to be reported under article 9-A of the Tax Law is for a period different from the period covered by the taxpayer's Federal income tax return, the taxpayer's entire net income must be prorated to correspond with the period covered by the report under article 9-A of the Tax Law. The prorated entire net income is computed as follows:

(1) adjust Federal taxable income in the manner set forth in sections 3-2.3, 3-2.4, 3-2.5 and 3-2.6 of this Subpart;

(2) divide the entire net income by the number of calendar months, or major parts thereof, covered by the return for Federal income tax purposes; and

(3) multiply the result by the number of calendar months, or major parts thereof, covered by the report under article 9-A of the Tax Law.

Example:

A calendar year taxpayer was organized in 1989 under the laws of another state where it carried on its business. It began to do business in New York State on March 14, 1991. It files its return for Federal income tax purposes for the calendar year 1991. Its Federal taxable income was $70,000. In computing its New York State entire net income for the period March 14, 1991 to December 31, 1991, its Federal taxable income for its taxable year 1991 ($70,000) is first adjusted as required in sections 3-2.3, 3-2.4, 3-2.5 and 3-2.6 of this Subpart. The taxpayer's entire net income after such adjustments was $78,000. Entire net income must be divided by 12 and the result multiplied by 10 (the number of months from March to December), resulting in a prorated entire net income of $65,000.

(b) The business allocation percentage must also be adjusted for the period the taxpayer is entitled to allocate its business income. The method for adjusting the business allocation percentage is described in section 4-6.4 of this Title.

(c) The method of computing entire net income set forth in subdivision (a) of this section applies to taxpayers reporting on either a calendar year or a fiscal year basis for Federal income tax purposes.

(d) If in the opinion of the Commissioner, the method described in this section does not properly reflect the taxpayer's entire net income for purposes of article 9-A of the Tax Law during the period covered by its report, the Commissioner may determine entire net income solely on the basis of the taxpayer's income during such period.

(e) In the case of a New York S termination year, as defined in section 1-2.25 of this Title, entire net income shall be assigned to the S short year, as defined in section 1-2.23 of this Title, and the C short year, as defined in section 1-2.24 of this Title, in accordance with section 208(9)(h)(2) of article 9-A of the Tax Law.