New York Codes, Rules and Regulations
Title 20 - DEPARTMENT OF TAXATION AND FINANCE
Chapter I - Franchise and Certain Business Taxes
Subchapter A - Business Corporation Franchise Tax
Part 4 - APPORTIONMENT
Subpart 4-2 - SPECIFIC APPORTIONMENT RULES
Section 4-2.12 - Interest income, net gains, and other income from other financial instruments

Universal Citation: 20 NY Comp Codes Rules and Regs § 4-2.12

Current through Register Vol. 47, No. 12, March 26, 2025

(Tax Law, section 210-A(5)(a)(2)(H))

(a) Interest income, net gains (not less than zero), and other income (not less than zero) from other financial instruments includes interest income, net gains, and other income from financial instruments that are not described in the rules for section 210-A(5)(a)(2)(A)-(G), (I), and (J) and the regulations in this Subchapter.

(b) Interest income from other financial instruments includes, but is not limited to, interest income on:

(1) deposit accounts;

(2) money market accounts;

(3) debt issued by a country, or political subdivision thereof, other than the United States; and

(4) reserves maintained with the Federal Reserve.

(c) Interest income from other financial instruments is included in New York receipts if the payor is located in New York State. 100% of such interest income is included in everywhere receipts.

(1) For purposes of this section, an individual, as payor or purchaser, is located in New York State if its billing address is in New York State; and a business entity, as payor or purchaser, is located in New York State if its commercial domicile is in New York State.

(2) The location for a government entity, as payor or purchaser, is dependent on the type of government entity. For example, when the payor is a foreign country, the payor would be wholly located outside of New York State, and when the payor is part of a federal banking system that operates multiple banks throughout the United States, the payor would be located in New York State to the extent of the percentage of banks in New York State.

(d)

(1) For each sale of a financial instrument apportioned under this section, the corporation shall compute a gain or loss from the sale by subtracting the adjusted basis in such financial instrument from the sale price of such financial instrument. If the sale price exceeds the adjusted basis, the result is a gain. If the sale price is less than the adjusted basis, the result is a loss.

(2) To determine the amount of net gains from sales of each type of financial instrument apportioned under this section, the gains from sales of a type of other financial instrument are reduced by the losses from sales of that same type of other financial instrument, provided the result cannot be less than zero. If the result is equal to or less than zero, no amount is included in New York receipts and everywhere receipts. The computation is done for each type of instrument so that gains from one type of financial instrument cannot offset losses from another type of financial instrument.

(3)
(i) The amount of net gains (not less than zero) from sales of a type of other financial instrument included in New York receipts is the product of net gains from the sales of that type of other financial instrument and a fraction, the numerator of which is gross proceeds from sales of that type of financial instrument to purchasers located within New York State and the denominator of which is gross proceeds from sales of that type of financial instrument to purchasers located within and without New York State. Net gains (not less than zero) from the sale of that type of other financial instrument is included in everywhere receipts.

(ii) Gross proceeds shall be determined after the deduction of transactional costs incurred to acquire the financial instrument, but shall not be less than zero. The transactional costs incurred to acquire the financial instrument shall not include the corporation's adjusted basis.

(e) Other income (not less than zero) from other financial instruments includes, but is not limited to, substitute payments in lieu of dividends and income received from stock of the Federal reserve bank.

(f) Examples.

Example 1: Taxpayer A earns $2,000,000 of interest income on deposits on accounts at the New York State branch and the State X branch of a bank whose commercial domicile is located in State Y. No interest income is included in New York receipts because the commercial domicile of the bank is State Y. The $2,000,000 of interest income is included in everywhere receipts.

Example 2: Taxpayer B receives $1,500 of income from Money Market Fund M. The commercial domicile of Money Market Fund M is State X. No interest income is included in New York receipts because the commercial domicile of Money Market Fund M is in State X. The $1,500 of income is included in everywhere receipts.

Example 3: Taxpayer C maintains reserves at its required Federal Reserve Bank. These funds generate $1,000 of interest income that is not considered interest income from Federal funds. Only one of the twelve Federal Reserve Banks is located in New York. As a result, 1/12 of the interest income is included in New York receipts. All $1,000 of interest income is included in everywhere receipts.

Example 4: As a member of the Federal Home Loan Bank (FHLBank), Taxpayer D is required to invest in the FHLBank. During the taxable year, Taxpayer D receives $10,000 of income from this investment. Only one of the eleven Federal Home Loan Banks is located in New York. As a result, while $10,000 is included in everywhere receipts, only 1/11 of the that amount, or $909, is included in New York receipts.

Example 5: Taxpayer E receives $2,000 of substitute payments in lieu of dividends from its stock of Corporation X, domiciled in state Y. No substitute payments in lieu of dividends are included in New York receipts because the payor, Corporation X, is domiciled in State Y. All $2,000 of such payments are included in everywhere receipts.

Example 6: Taxpayer F owns debt issued by Country X, debt issued by Country Y, debt issued by Country Z, foreign currency swaps for the currency A, and foreign currency swaps for currency B. Taxpayer F has two types of other financial instruments " debt issued by other countries and foreign currency swaps. Any gains from sales of debt issued by other countries may be reduced only by losses from sales of debt issued by other countries and any gains from sales of foreign currency swaps may be reduced only by losses from sales of foreign currency swaps.

Disclaimer: These regulations may not be the most recent version. New York may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.
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