TAF-49-10-00003-P Discretionary Adjustments to the Method of Allocation

12/8/10 N.Y. St. Reg. TAF-49-10-00003-P

NEW YORK STATE REGISTER

VOLUME XXXII, ISSUE 49

December 08, 2010

RULE MAKING ACTIVITIES

DEPARTMENT OF TAXATION AND FINANCE

PROPOSED RULE MAKING

NO HEARING(S) SCHEDULED

 

I.D No. TAF-49-10-00003-P

Discretionary Adjustments to the Method of Allocation

PURSUANT TO THE PROVISIONS OF THE State Administrative Procedure Act, NOTICE is hereby given of the following proposed rule:

Proposed Action:

This is a consensus rule making to amend sections 4-6.1 and 19-8.4 of Title 20 NYCRR.

Statutory authority:

Tax Law, sections 171, subd. First, 210(8), 1096(a) and 1454(a)(6)

Subject:

Discretionary adjustments to the method of allocation.

Purpose:

Update the administrative procedures concerning taxpayer requests for discretionary adjustments to the method of allocation.

Text of proposed rule:

Section 1. Subdivision (c) of section 4-6.1 of such regulations is amended to read as follows:

(c) A taxpayer may not vary the statutory business allocation percentage or alternative business allocation percentage formulas described in sections [4-2.2 of this Part and 210(3-a)(a) of the Tax Law, respectively,] 210(3)(a) and 210(3-a)(a) of the Tax Law without the [prior] consent of the commissioner. A taxpayer making a request for an adjustment of its business allocation percentage or alternative business allocation percentage that does not have such consent prior to the time it files its report must file its report and compute its tax in accordance with the statutory formulas. A request to vary the statutory formula must be [attached to the report setting] submitted separately from the report as prescribed by the Department and must set forth full information on which the request is based[, together with a computation of the amount of tax which would be due under the proposed method].

Section 2. Section 19-8.4 of such regulations is amended to read as follows:

Section 19-8.4 Power of the [Tax Commission] Commissioner of Taxation and Finance to adjust or change the method of allocation. (Tax Law, Section 1454(a)(6))

(a) When it appears that the entire net income allocation percentage, the alternative entire net income allocation percentage or the asset allocation percentage described in [this Part] section 1454 of the Tax Law does not properly reflect the activity, business, income or assets of the taxpayer in New York State, the [Tax Commission, in its] commissioner, in his or her discretion, may adjust the entire net income allocation percentage, the alternative entire net income allocation percentage or the asset allocation percentage by:

1) excluding one or more factors; or

2) including one or more factors.

(b) The [Tax Commission] commissioner is authorized, in [its] his or her discretion, to permit or require the allocation of entire net income, alternative entire net income or taxable assets by a different method of allocation when it appears to the [Tax Commission] commissioner that such method of allocation will effect a fair and proper allocation of the taxpayer's income or assets reasonably attributable to New York State.

(c) A taxpayer may not adjust the entire net income allocation percentage, the alternative entire net income allocation percentage or the asset allocation percentage described in [this Part] section 1454 of the Tax Law, or use a different method of allocating its entire net income, alternative entire net income or taxable assets within and without New York State, without the [written] consent of the [Tax Commission] commissioner. A request to adjust the entire net income allocation percentage, the alternative entire net income allocation percentage or the asset allocation percentage, or to use a different method of allocation, must be [sent to:

State Tax Commission Central Office Audit Bureau Corporation Tax Section Building 9 W. Averell Harriman State Office Campus Albany, New York 12227

The request] submitted separately from the report as prescribed by the Department and must set forth complete information on which the request is made[, together with a computation of the amount of tax which would be due under the proposed method]. A taxpayer making a request for an adjustment of any of its allocation percentages, or to use a different method of allocation, that does not have such consent prior to the time it files its report, must compute and pay its tax in accordance with the entire net income allocation percentage, the alternative entire net income allocation percentage and the asset allocation percentage described in [this Part] section 1454 of the Tax Law, and it must file its return in accordance with the instructions shown on the return.

(d) If a taxpayer has been permitted or required to adjust the entire net income allocation percentage, alternative entire net income allocation percentage or asset allocation percentage described in [this Part] section 1454 of the Tax Law, or to use a different method of allocating its entire net income, alternative entire net income or taxable assets within and without New York State, the taxpayer must continue to use such permitted or required method in subsequent taxable years. If the facts materially change, the taxpayer must notify the [Tax Commission] commissioner of such change. If such permitted or required method no longer properly reflects the activity, business, income or assets of the taxpayer, the taxpayer must request permission, or the [tax Commission] commissioner may require the taxpayer, to change such permitted or required method.

(e) See section [18-1.3 of this Title] 1462(g) of the Tax Law concerning other powers of the [Tax Commission] commissioner to adjust entire net income, alternative entire net income and taxable assets.

Text of proposed rule and any required statements and analyses may be obtained from:

John W. Bartlett, Tax Regulations Specialist 4, Department of Taxation and Finance, Taxpayer Guidance Division, Building 9, W. A. Harriman Campus, Albany, NY 12227, [phone], email: [e-mail]

Data, views or arguments may be submitted to:

Same as above.

Public comment will be received until:

45 days after publication of this notice.

Consensus Rule Making Determination

The Department of Taxation and Finance has determined that no person is likely to object to the rule as written because it merely updates the administrative procedures concerning taxpayer requests for discretionary adjustments to the method of allocation for purposes of the Business Corporation Franchise Tax and the Franchise Tax on Banking Corporations.

The existing regulations direct taxpayers to make a request with the filing of their report and compute the tax due under the statutory formulas. The Department has not viewed this as an exclusive method of making the request and, in fact, submitting the request with the report is problematic as the request would not be submitted directly to the Department personnel responsible for evaluating the request. The amendments provide that a taxpayer request be made separate and apart from the filing of the report as prescribed by the Department and eliminate the requirement that taxpayers must in every instance submit the computation of tax under the proposed method. The Department will issue further guidance to advise taxpayers where to submit their requests. Additionally, a taxpayer that receives the commissioner's consent prior to the filing of its report would be able to file using the approved methodology. Some technical and clarifying changes have also been made.

Job Impact Statement

A Job Impact Statement is not being submitted with this rule because it is evident from the subject matter that the rule will have no impact on jobs or employment opportunities. The rule simply updates the administrative procedures concerning taxpayer requests for discretionary adjustments to the method of allocation.