NY Tax L § 40 (2021)
2021 New York Laws TAX - Tax Article 1 - Short Title; Definitions; Miscellaneous 40 - The Tax-Free Ny Area Tax Elimination Credit.

§  40.  The  tax-free NY area tax elimination credit. (a) Allowance of credit. A taxpayer that is a business or owner of a business in the case of a business taxed as a sole proprietorship, partnership or New York  S corporation,  that is located in a tax-free NY area approved pursuant to article twenty-one of the economic development law and is subject to tax under article nine-A, or twenty-two of this chapter, shall be allowed  a credit  against  such  tax,  pursuant  to  the  provisions referenced in subdivision (e) of this section, to be computed as hereinafter provided.  (b) Amount of credit. The amount of the credit shall  be  the  product of:  (1) the tax-free area allocation factor; and (2) the tax factor.  (c)  Tax-free  area  allocation  factor.  The tax-free area allocation factor shall be the  percentage  representing  the  business's  economic presence  in  the tax-free NY area in which the business was approved to locate pursuant to article twenty-one of the economic  development  law. This percentage shall be computed by:  (1)  ascertaining  the  percentage  that  the  average  value  of  the business's real and tangible personal property, whether owned or  rented to  it, in the tax-free NY area in which the business was located during the period covered by the taxpayer's  report  or  return  bears  to  the average  value  of  the  business's real and tangible personal property, whether owned or rented to it, within  the  state  during  such  period; provided  that  the  term  "value  of  the  business's real and tangible personal property" shall have the same  meaning  as  such  term  has  in paragraph  (a)  of subdivision two of section two hundred nine-B of this chapter; and  (2) ascertaining the percentage that the  total  wages,  salaries  and other  personal  service  compensation,  similarly computed, during such period of employees, except general executive officers, employed at  the business's  location  in the tax-free NY area, bears to the total wages, salaries and other personal service  compensation,  similarly  computed, during  such  period,  of all the business's employees within the state, except general executive officers; and  (3) adding together the percentages so  determined  and  dividing  the result by two.   For purposes of article twenty-two of this chapter, references in this subdivision  to  property,  wages,  salaries  and other personal service compensation shall be deemed to be references to  such  items  connected with the conduct of a business.  (d)  Tax  factor. (1) General. The tax factor shall be, in the case of article nine-A of this chapter,  the  largest  of  the  amounts  of  tax determined  for  the  taxable  year  under paragraphs (a) through (d) of subdivision one of section two hundred ten of  such  article  after  the deduction  of  any  other  credits allowable under such article. The tax factor shall be, in the case of article twenty-two of this chapter,  the tax determined for the taxable year under subsections (a) through (d) of section six hundred one of such article after the deduction of any other credits allowable under such article.  (2)  Sole  proprietors,  partners  and S corporation shareholders. (A) Where the taxpayer is a sole proprietor  of  a  business  located  in  a tax-free NY area, the taxpayer's tax factor shall be that portion of the amount   determined  in  paragraph  one  of  this  subdivision  that  is attributable to the income of  the  business  at  its  location  in  the tax-free  NY area. Such attribution shall be made in accordance with the ratio of the taxpayer's income from such business allocated  within  the state,  entering  into New York adjusted gross income, to the taxpayer's New York adjusted gross income, or in accordance with such other methods as the commissioner may prescribe as  providing  an  apportionment  that reasonably  reflects  the  portion of the taxpayer's tax attributable to  the income of such business. In no event may  the  ratio  so  determined exceed  1.0.  The  income  from such business allocated within the state shall be determined as if the sole proprietor was a non-resident.  (B)(i)  Where  the  taxpayer  is  a  member of a partnership that is a business located in a tax-free NY area, the taxpayer's tax factor  shall be  that  portion  of  the  amount  determined  in paragraph one of this subdivision that is attributable to the income of the partnership.  Such attribution  shall be made in accordance with the ratio of the partner's income from the partnership allocated within the state to the  partner's entire  income,  or  in  accordance  with  such  other  methods  as  the commissioner may prescribe as providing an apportionment that reasonably reflects the portion of the partner's tax attributable to the income  of the partnership. In no event may the ratio so determined exceed 1.0. The income  from  the  partnership  allocated  within  the  state  shall  be determined as if any of the partners was a non-resident.  (ii) For  purposes  of  article  nine-A  of  this  chapter,  the  term "partner's  income  from  the  partnership"  means  partnership items of income, gain, loss and deduction, and New  York  modifications  thereto, entering  into  business  income  and the term "partner's entire income" means business income, allocated  within  the  state.  For  purposes  of article  twenty-two of this chapter, the term "partner's income from the partnership"  means  partnership  items  of  income,  gain,   loss   and deduction,  and  New  York modifications thereto, entering into New York adjusted gross income, and the term "partner's entire income" means  New York adjusted gross income.  (C)  (i)  Where  the  taxpayer  is  a  shareholder  of  a  New  York S corporation that is a business  located  in  a  tax-free  NY  area,  the shareholder's  tax factor shall be that portion of the amount determined in paragraph one of this subdivision that is attributable to the  income of  the S corporation. Such attribution shall be made in accordance with the ratio of the shareholder's income from the S  corporation  allocated within  the  state, entering into New York adjusted gross income, to the shareholder's New York adjusted gross income, or in accordance with such other  methods  as  the  commissioner  may  prescribe  as  providing  an apportionment  that reasonably reflects the portion of the shareholder's tax attributable to the income of such business. The  income  of  the  S corporation   allocated   within   the  state  shall  be  determined  by multiplying the income of the S corporation  by  a  business  allocation factor  that shall be determined in clause (ii) of this subparagraph. In no event may the ratio so determined exceed 1.0.  (ii) The business allocation factor for purposes of this  subparagraph shall  be  computed  by adding together the property factor specified in subclause (I) of this clause, the wage  factor  specified  in  subclause (II)  of  this  clause  and  the  apportionment  factor determined under section two hundred ten-A of this chapter and dividing by three.  (I) The property  factor  shall  be  determined  by  ascertaining  the percentage  that  the  average value of the business's real and tangible personal property, whether owned or  rented  to  it,  within  the  state during  the  period  covered by the taxpayer's report or return bears to the average value of the business's real and tangible personal property, whether owned or rented to it, within and without the state during  such period;  provided  that  the  term  "value  of  the  business's real and tangible personal property" shall have the same meaning as such term has in paragraph (a) of subdivision two of section  two  hundred  nine-B  of this chapter.  (II)   The  wage  factor  shall  be  determined  by  ascertaining  the percentage that the total wages, salaries  and  other  personal  service compensation,  similarly  computed,  during  such  period  of employees,  except general executive officers, employed at the  business's  location or  locations  within  the state, bears to the total wages, salaries and other personal service compensation,  similarly  computed,  during  such period,  of  all  the business's employees within and without the state, except general executive officers.  (3) Combined returns or reports. (A) Where the taxpayer is a  business located  in  a  tax-free  NY area and is required or permitted to make a return or report on a  combined  basis  under  article  nine-A  of  this chapter,  the  taxpayer's  tax  factor shall be the amount determined in paragraph one of this subdivision that is attributable to the income  of such  business.  Such  attribution  shall be made in accordance with the ratio of the  business's  income  allocated  within  the  state  to  the combined group's income, or in accordance with such other methods as the commissioner may prescribe as providing an apportionment that reasonably reflects  the  portion  of  the combined group's tax attributable to the income of such business. In no event may the ratio so determined  exceed 1.0.  (B)  The  term  "income of the business located in a tax-free NY area" means  business  income  calculated  as  if  the  taxpayer  was   filing separately  and the term "combined group's income" means business income as shown on the combined report, allocated within the state.  (4) If a business is generating or receiving income  from  a  line  of business  or  intangible property that was previously conducted, created or developed by the business or  a  related  person,  as  that  term  is defined  in  section four hundred thirty-one of the economic development law, the tax factor specified in this subdivision shall be  adjusted  to disregard such income.  (e)  Cross-references.  For  application of the credit provided for in this section, see the following provisions of this chapter:  (1) Article 9-A: section 210-B, subdivision 41.  (2)  Article  22:  section  606,  subsection   (i),   paragraph   (1), subparagraph (B), clause (xxxvi).  (3) Article 22: section 606, subsection (ww).