Sec. 132.21. Special rules for security and commodity brokers

(a) For taxable years beginning on or after January 1, 1978, security and commodity brokers doing business both within and without New York State, as determined under section 132.14 of this Part, may elect to allocate the income from such business in accordance with the provisions of section 132.15(c) of this Part. The election must be made by the due date, including any extensions, of the time to file a New York State nonresident personal income tax return for the first taxable year beginning on or after January 1, 1978. A taxpayer who fails to make a timely election under this section must use the allocation method prescribed by section 132.15(b) of this Part. Once the taxpayer uses the method prescribed by section 132.15(b) of this Part, or elects to allocate in accordance with subdivision (c) of such section, the taxpayer must continue to use the allocation method implemented unless, after application in writing to the Tax Commission, the Tax Commission determines that the method of allocation used no longer reflects income which is fairly applicable to New York State. If the Tax Commission permits the taxpayer to revoke the method of allocation of income under this section, a copy of such permission of revocation of election must be attached to the New York State nonresident personal income tax return for the first taxable period to which such revocation of election is applicable.

(b) In any method of apportionment and allocation permitted or required under section 132.15 of this Part, the commissions derived from the execution of purchase or sales orders for the account of customers must be allocated and apportioned as follows:

(1) If an order is received at the New York State place of business of a broker for execution on an exchange located within New York State, and originates at a bona fide established office of the broker located within New York State, 100 percent of the commission in the case of stocks, bonds and commodities must be apportioned and allocated to New York State and constitutes income derived from or connected with New York State sources in the taxable period in which such order is executed.

(2) If the order is received at the New York State place of business of a broker for execution on an exchange located within New York State, and originates at a bona fide established office of the broker located without New York State, 20 percent of the commission in the case of stocks, bonds and commodities must be apportioned and allocated to New York State and constitutes income derived from or connected with New York State sources in the taxable period in which such order is executed.

(3) If the order originates at the New York State place of business of a broker and is transmitted to a bona fide established office of the broker located without New York State for execution on an exchange located without New York State, 80 percent of the commission in the case of stocks, bonds and commodities must be apportioned and allocated to New York State and constitutes income derived from or connected with New York State sources in the taxable period in which such order is executed.

(4) For taxable periods commencing on and after January 1, 1978, the taxpayer may allocate commission income on the basis of actual experience if such taxpayer can demonstrate to the satisfaction of the Tax Commission that the allocation pursuant to paragraphs (2) and (3) of this subdivision does not fairly reflect the amount of commission income attributable to New York State.

(5) Commission income derived from over-the-counter transactions must be apportioned and allocated to New York State in the following manner:

(i) If the order originates at or through a New York State place of business of the taxpayer, 100 percent of the commission income must be apportioned and allocated to New York State.

(ii) If the order originates at or through a bona fide established office of the taxpayer located outside New York State, no portion of the commission income is attributable to New York State.