Sec. 3-3.1. Computing the tax measured by the capital base

Tax Law, §§ 209(5) and (7), 210(1) and (1-c)

(a) Generally, the capital base is the measure of the tax if such calculation results in a greater amount of tax than that computed on the entire net income base, the minimum taxable income base or the fixed dollar minimum. The capital base is the total of business capital and investment capital, or the portions of each allocated within New York State. The rate of tax is 1.78 mills (or 0.4 of a mill in the case of a cooperative housing corporation) for each dollar of the capital base. The tax measured by the capital base may not exceed $350,000. In the case of a small business taxpayer, special rules apply (see section 210[1] of the Tax Law).

(b) For purposes of subdivision (a) of this section, a cooperative housing corporation means a corporation:

(1) having one and only one class of stock outstanding (stock which is disregarded under section 216 of the Internal Revenue Code will be disregarded);

(2) each of the stockholders of which is entitled, solely by reason of his ownership of stock in the corporation, to occupy for dwelling purposes a house, or an apartment in a building, owned or leased by such corporation;

(3) no stockholder of which is entitled (either conditionally or unconditionally) to receive any distribution not out of earnings and profits of the corporation except on a complete or partial liquidation of the corporation; and

(4) 80 percent or more of the gross income of which for the taxable year is derived from tenant-stockholders.

(c) The tax measured by the capital base does not apply to:

(1) a regulated investment company, as defined in section 851 of the Internal Revenue Code (see Subpart 3-12 of this Part—Regulated Investment Companies);

(2) a real estate investment trust, as defined in section 856 of the Internal Revenue Code (see Subpart 3-11 of this Part—Real Estate Investment Trusts);

(3) the first two taxable years of a taxpayer which, for one or both such years, is a small business concern, as defined in subdivision (d) of this section; or

(4) a New York S corporation, as defined in section 208(1-A) of the Tax Law.

(d) A small business concern is a taxpayer that is a small business corporation, as defined in section 1244(c)(3) of the Internal Revenue Code (without regard to the second sentence of subparagraph [A] thereof) as of the last day of the taxable year, and which had at least 90 percent of its assets, valued at original cost, located and employed in New York State during the taxable year and 80 percent of its employees (as ascertained within the meaning and intent of Subpart 4-5 of this Title) principally employed in New York State during the taxable year, provided:

(1) it is not a subsidiary, as defined in section 3-6.2 of this Part, owned by a taxpayer which:

(i) is subject to tax under article 9-A; section 183, 184, 185 or 186 of article 9; article 32 or article 33 of the Tax Law; and

(ii) does not qualify as a small business corporation, as defined in section 1244(c)(3) of the Internal Revenue Code (without regard to the second sentence of subparagraph [A] thereof) as of the last day of its taxable year ending within or with the taxable year of the taxpayer; and

(2) it is not a corporation which is substantially similar in operation and in ownership to a business entity (or entities) taxable or previously taxable under article 9-A; section 183, 184, 185 or 186 of article 9; article 32; article 33 or article 23 of the Tax Law or which would have been subject to tax under article 23 (as such article was in effect on January 1, 1980) or the income (or losses) of which is (or was) includable under article 22 of the Tax Law.

(e) Where a group of corporations files a combined report, the combined capital base is the measure of the tax if such calculation results in a greater amount of tax than that computed on the combined entire net income base, the combined minimum taxable income base or the fixed dollar minimum that is attributable to the corporation paying the combined tax. The tax measured by the combined capital base may not exceed $350,000. The combined capital base is the sum of:

(1) the total of the amounts of business capital of each corporation included in the combined report with intercorporate eliminations (see section 3-3.8 of this Part), or the portion of such total allocated within New York State; and

(2) the total of the amounts of investment capital of each corporation included in the combined report with intercorporate eliminations (see section 3-3.8 of this Part), or the portion of such total allocated within New York State.

(f) For rules relating to corporate partners see Subpart 3-13 of this Part—Corporate Partners.