Sec. 3-3.3. Definition of business capital

Tax Law, §§ 208(7) and (8-A)(a); and 210(2)

(a) The term business capital means the total average value of all the taxpayer's assets (whether or not shown on its balance sheet), exclusive of stock issued by the taxpayer (treasury stock) or assets constituting subsidiary capital (see section 3-6.3 of this Part—Definition of subsidiary capital) or investment capital (see section 3-3.2 of this Subpart), less the average value of liabilities, not deducted in computing subsidiary capital or investment capital.

(b) Where a taxpayer owns real property subject to a debt, lien, encumbrance or other obligation, the fair market value of the property, not the taxpayer's equity therein, shall be used in computing the average value of the property in valuing business capital, whether or not the taxpayer has any personal liability under any obligation to which the property is held subject.

(c) The term business capital includes loans to a subsidiary, the interest on which is claimed by and allowed to the subsidiary as a deduction for the purposes of any tax imposed by article 9-A, 32 or 33 of the Tax Law, provided such loans do not constitute investment capital pursuant to section 3-3.2 of this Subpart. It also includes investments in the stocks, bonds or other securities of a DISC or any indebtedness from a DISC. The term business capital does not include futures contracts or forward contracts.

(d) At the election of the taxpayer, cash on hand and cash on deposit may be treated on any report as either business capital or investment capital. In making the election, a taxpayer that is a partner in a partnership and is using the aggregate method pursuant to section 3-13.3 of this Part or that is a foreign corporate limited partner that has made an election with respect to such partnership pursuant to the provisions of section 3-13.5 of this Part takes into account its proportionate part (see section 3-13.3[a][2] of this Part) of partnership items that constitute cash on hand and cash on deposit. Any debt instrument, including a certificate of deposit, which is described in paragraph (2) or (3) of subdivision (c) of section 3-3.2 of this Subpart and is not described in paragraph (2) of subdivision (a) of such section, and which is payable by its terms on demand or within six months and one day from the date on which the debt was incurred is deemed to be cash on hand or on deposit. Any such debt instrument which is payable by its terms more than six months and one day from the date on which the debt was incurred is deemed to be cash on hand or on deposit on any day which is not more than six months and one day prior to its date of maturity. Cash also includes shares in a money market mutual fund. A money market mutual fund is a no-load, open-end investment company registered under the Federal Investment Company Act of 1940 which attempts to maintain a constant net asset value per share and holds itself out to be a “money market” fund. A taxpayer may not elect to treat part of its cash as business capital and part as investment capital. No election to treat cash as business capital may be made where the taxpayer has no other business capital.