S T A T E   O F   N E W   Y O R K
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                                  4784

                       2011-2012 Regular Sessions

                          I N  A S S E M B L Y

                            February 7, 2011
                               ___________

Introduced  by M. of A. MORELLE -- read once and referred to the Commit-
  tee on Ways and Means

AN ACT to amend the tax law, in relation to computing the combined allo-
  cation percentage of a group of corporations required or permitted  to
  be included in a combined report where one or more of such members are
  mutual fund service providers

  THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section 1. Paragraph 3 of subsection (f) of section 1462  of  the  tax
law,  as  amended  by section 7 of part E-1 of chapter 57 of the laws of
2009, is amended to read as follows:
  (3) (i) In the case of a combined return, the tax shall be measured by
the ALLOCATED combined entire net income, ALLOCATED combined alternative
entire net income or ALLOCATED combined assets of all  the  corporations
included in the return, including any captive REIT, captive RIC or over-
capitalized  captive  insurance company. The allocation percentage shall
be computed based on the combined factors with respect to all the corpo-
rations included in the combined return. In  computing  combined  entire
net  income  and  combined  alternative entire net income intercorporate
dividends and all other intercorporate transactions shall be  eliminated
and in computing combined assets intercorporate stockholdings and inter-
corporate  bills,  notes  and  accounts receivable and payable and other
intercorporate indebtedness shall be eliminated.
  (ii) In the case of a captive REIT required under this  subsection  to
be included in a combined return, "entire net income" means "real estate
investment trust taxable income" as defined in paragraph two of subdivi-
sion  (b)  of  section eight hundred fifty-seven (as modified by section
eight hundred fifty-eight) of the internal revenue code, plus the amount
taxable under paragraph  three  of  subdivision  (b)  of  section  eight
hundred  fifty-seven of that code, subject to the modifications required
by section fourteen hundred fifty-three of this article. In the case  of

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD05493-02-1
              

A. 4784                             2

a  captive  RIC  required  under  this  subsection  to  be included in a
combined return, "entire net income" means "investment  company  taxable
income"  as defined in paragraph two of subdivision (b) of section eight
hundred  fifty-two  (as modified by section eight hundred fifty-five) of
the internal revenue code, plus the amount taxable under paragraph three
of subdivision (b) of section eight  hundred  fifty-two  of  that  code,
subject  to  the  modifications  required  by  section  fourteen hundred
fifty-three of this article. However, the deduction under  the  internal
revenue  code  for  dividends paid by the captive REIT or captive RIC to
any member of the affiliated group that includes  the  corporation  that
directly  or  indirectly  owns over fifty percent of the voting stock of
the captive REIT or  captive  RIC  will  be  limited  to  the  following
percentages:  (A)  fifty percent for taxable years beginning on or after
January first, two thousand eight and before January first, two thousand
nine; (B) twenty-five percent for taxable years beginning  on  or  after
January  first, two thousand nine and before January first, two thousand
eleven; and (C) zero percent for taxable years  beginning  on  or  after
January  first,  two  thousand eleven. The term "affiliated group" means
"affiliated group" as defined in section fifteen  hundred  four  of  the
internal revenue code, but without regard to the exceptions provided for
in subsection (b) of such section fifteen hundred four.
  (iii)  In  the  case  of  an overcapitalized captive insurance company
required under this subsection to be  included  in  a  combined  return,
entire  net  income  must  be  computed  as required by section fourteen
hundred fifty-three of this article.
  (IV)  IF  A  BANKING  CORPORATION  DESCRIBED  IN  PARAGRAPH  NINE   OF
SUBSECTION  (A)  OF  SECTION  FOURTEEN HUNDRED FIFTY-TWO OF THIS ARTICLE
THAT SUBSTANTIALLY PROVIDES MANAGEMENT, ADMINISTRATIVE  OR  DISTRIBUTION
SERVICES TO AN INVESTMENT COMPANY, AS SUCH TERMS ARE DEFINED IN SUBPARA-
GRAPH (G) OF PARAGRAPH TWO OF SUBSECTION (A) OF SECTION FOURTEEN HUNDRED
FIFTY-FOUR OF THIS ARTICLE, IS REQUIRED OR PERMITTED TO BE INCLUDED IN A
COMBINED  RETURN  WITH  A  BANKING CORPORATION OR A BANK HOLDING COMPANY
THAT  DOES  NOT  SUBSTANTIALLY  PROVIDE  MANAGEMENT,  ADMINISTRATIVE  OR
DISTRIBUTION  SERVICES  TO AN INVESTMENT COMPANY, THE ALLOCATED COMBINED
ENTIRE NET INCOME, ALLOCATED COMBINED ALTERNATIVE ENTIRE NET  INCOME  OR
ALLOCATED  COMBINED  ASSETS  IN THE COMBINED RETURN SHALL BE COMPUTED AS
FOLLOWS:
  (A) THE ENTIRE NET INCOME, ALTERNATIVE NET INCOME  OR  ASSETS  OF  ALL
SUCH  BANKING CORPORATIONS INCLUDED IN THE COMBINED RETURN THAT SUBSTAN-
TIALLY PROVIDE MANAGEMENT, ADMINISTRATIVE OR DISTRIBUTION SERVICES TO AN
INVESTMENT COMPANY SHALL BE COMBINED AND MULTIPLIED  BY  THE  ALLOCATION
PERCENTAGE  FOR  ALL  SUCH  BANKING  CORPORATIONS  COMPUTED BASED ON THE
COMBINED FACTOR OR FACTORS WITH  RESPECT  TO  ALL  SUCH  BANKING  CORPO-
RATIONS,  AS DETERMINED PURSUANT TO PARAGRAPH ONE-A OF SUBSECTION (B) OF
SECTION FOURTEEN HUNDRED FIFTY-FOUR OF THIS ARTICLE;
  (B) THE ENTIRE NET INCOME, ALTERNATIVE NET INCOME  OR  ASSETS  OF  ALL
OTHER  BANKING  CORPORATIONS  INCLUDED  IN  THE COMBINED RETURN SHALL BE
COMBINED AND MULTIPLIED BY THE ALLOCATION PERCENTAGE FOR ALL SUCH  BANK-
ING  CORPORATIONS COMPUTED BASED ON THE COMBINED FACTORS WITH RESPECT TO
ALL SUCH BANKING CORPORATIONS, AS DETERMINED PURSUANT TO  PARAGRAPH  ONE
OF  SUBSECTION  (B) OF SECTION FOURTEEN HUNDRED FIFTY-FOUR OF THIS ARTI-
CLE;
  (C) THE PRODUCT OF EACH GROUP SO OBTAINED SHALL BE ADDED TOGETHER; AND
  (D) FOR PURPOSES OF CLAUSES (A)  AND  (B)  OF  THIS  SUBPARAGRAPH,  IN
COMPUTING  EACH  GROUPS COMBINED ENTIRE NET INCOME AND COMBINED ALTERNA-
TIVE ENTIRE NET INCOME INTERCORPRATE DIVIDENDS AND ALL OTHER INTERCORPO-

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RATE TRANSACTIONS BETWEEN THE TWO GROUPS SHALL  BE  ELIMINATED,  AND  IN
COMPUTING COMBINED ASSETS OF EACH GROUP INTERCORPORATE STOCKHOLDINGS AND
INTERCORPORATE  BILLS,  NOTES  AND  ACCOUNTS  RECEIVABLE AND PAYABLE AND
OTHER INTERCORPORATE INDEBTEDNESS BETWEEN THE TWO GROUPS SHALL BE ELIMI-
NATED.
  PROVIDED  FURTHER,  THAT  IF  THE ENTIRE NET INCOME OR ALTERNATIVE NET
INCOME OF EITHER GROUP IS A LOSS, THE  AMOUNT  OF  SUCH  LOSS  SHALL  BE
SUBTRACTED  FROM  THE OTHER GROUP'S ENTIRE NET INCOME OR ALTERNATIVE NET
INCOME, RESPECTIVELY, BEFORE ALLOCATION.
  S 2. This act shall take effect immediately and shall apply to taxable
years beginning on or after January 1, 2006.