§ 292. Unrelated business taxable income. (a) The unrelated business taxable income of a taxpayer subject to the tax imposed by section two hundred ninety shall be such taxpayer's federal unrelated business taxable income, as defined in the laws of the United States for the taxable year, with the following modifications: (1) There shall be added to federal unrelated business taxable income the amount of any tax imposed under this article. (2) There shall be subtracted from federal unrelated business taxable income the amount of any refund or credit for overpayment of a tax imposed under this article or article twenty-three of this chapter. (3) The net operating loss deduction which shall be allowed shall be the same as the net operating loss deduction allowed under paragraph six of subsection (b) of section five hundred twelve of the internal revenue code of nineteen hundred fifty-four, except that (A) any net operating loss included in determining such deduction shall be adjusted to reflect the addition and subtraction from unrelated business taxable income required by paragraphs one and two of this subdivision, (B) such deduction shall not include any net operating loss sustained during any taxable year beginning prior to January first, nineteen hundred seventy, or during any taxable year in which the taxpayer was not subject to the tax imposed by this article, and (C) such deduction shall not exceed the deduction for the taxable year allowable under paragraph six of subsection (b) of section five hundred twelve of the internal revenue code of nineteen hundred fifty-four. (4) There shall be subtracted from federal unrelated business taxable income any amount which is included therein solely by reason of the application of section 501(m)(2)(A) of the internal revenue code. (5) Shareholders of S corporations. (A) In the case of a shareholder of an S corporation, (i) where the election provided for in subsection (a) of section six hundred sixty of this chapter is in effect with respect to such corporation, there shall be added to federal unrelated business taxable income an amount equal to the shareholder's pro rata share of the corporation's reductions for taxes described in paragraphs two and three of subsection (f) of section thirteen hundred sixty-six of the internal revenue code, and (ii) where such election has not been made with respect to such corporation, there shall be subtracted from federal unrelated business taxable income any items of income of the corporation included therein, and there shall be added to federal unrelated business taxable income any items of loss or deduction included therein, and (iii) in the case of a New York S termination year, the amount of any such items of S corporation income, loss, deduction and reductions for taxes shall be adjusted in the manner provided in paragraph two or three of subsection (s) of section six hundred twelve of this chapter. (B) In the case of a shareholder of a corporation which was, for any of its taxable years beginning after nineteen hundred ninety-seven, a federal S corporation but a New York C corporation: (i) There shall be added to federal unrelated business taxable income S corporation distributions to the extent not included therein because of the application of section thirteen hundred sixty-eight or subsection (e) of section thirteen hundred seventy-one of the internal revenue code, which represent income not previously subject to tax under this article because the election provided for in subsection (a) of section six hundred sixty of this chapter had not been made. Any such distribution treated in the manner described in paragraph two ofsubsection (b) of such section thirteen hundred sixty-eight shall be treated as ordinary income for purposes of this article. (ii) Where gain or loss is included in unrelated business taxable income upon the disposition of stock or indebtedness of such corporation, (I) there shall be added to unrelated business taxable income the amount of increase in basis of such stock or indebtedness with respect to such New York C years of the corporation, pursuant to subparagraphs (A) and (B) of paragraph one of subsection (a) of section thirteen hundred sixty-seven of such code, and (II) there shall be subtracted from unrelated business taxable income the amount of decrease in such basis with respect to such New York C years of the corporation, pursuant to subparagraphs (B) and (C) of paragraph two of subsection (a) of such section thirteen hundred sixty-seven, and (III) there shall be subtracted from unrelated business taxable income the amount of modifications to unrelated business taxable income with respect to such stock pursuant to clause (i) of subparagraph (B) of this paragraph. (C) Cross reference. For definitions relating to S corporations, see subdivision one-A of section two hundred eight of this chapter. (6) Related members expense add back and income exclusion. (A) Definitions. (i) Related member or members. For purposes of this paragraph, the term related member or members means a person, corporation, or other entity, including an entity that is treated as a partnership or other pass-through vehicle for purposes of federal taxation, whether such person, corporation or entity is a taxpayer or not, where one such person, corporation, or entity, or set of related persons, corporations or entities, directly or indirectly owns or controls a controlling interest in another entity. Such entity or entities may include all taxpayers under article nine, nine-A, thirteen, twenty-two, thirty-two, thirty-three or thirty-three-A of this chapter. (ii) Controlling interest. A controlling interest shall mean (I) in the case of a corporation, either thirty percent or more of the total combined voting power of all classes of stock of such corporation, or thirty percent or more of the capital, profits or beneficial interest in such voting stock of such corporation, and (II) in the case of a partnership, association, trust or other entity, thirty percent or more of the capital, profits or beneficial interest in such partnership, association, trust or other entity. (iii) Royalty payments. Royalty payments are payments directly connected to the acquisition, use, maintenance or management, ownership, sale, exchange, or any other disposition of licenses, trademarks, copyrights, trade names, trade dress, service marks, mask works, trade secrets, patents and any other similar types of intangible assets as determined by the commissioner, and includes amounts allowable as interest deductions under section one hundred sixty-three of the internal revenue code to the extent such amounts are directly or indirectly for, related to or in connection with the acquisition, use, maintenance or management, ownership, sale, exchange or disposition of such intangible assets. (iv) Valid business purpose. A valid business purpose is one or more business purposes other than the avoidance or reduction of taxation which alone or in combination constitute the primary motivation for some business activity or transaction, which activity or transaction changes in a meaningful way, apart from tax effects, the economic position of the taxpayer. The economic position of the taxpayer includes an increasein the market share of the taxpayer, or the entry by the taxpayer into new business markets. (B) Royalty expense add backs. (i) For the purpose of computing New York unrelated business taxable income, a taxpayer must add back royalty payments to a related member during the taxable year to the extent deductible in calculating federal unrelated business taxable income; (ii) The add back of royalty payments shall not be required if and to the extent that such payments meet either of the following conditions: (I) the related member during the same taxable year directly or indirectly paid or incurred the amount to a person or entity that is not a related member, and such transaction was done for a valid business and the payments are made at arm's length; (II) the royalty payments are paid or incurred to a related member organized under the laws of a country other than the United States, are subject to a comprehensive income tax treaty between such country and the United States, and are taxed in such country at a tax rate at least equal to that imposed by this state. (C) Royalty income exclusions. For the purpose of computing New York unrelated business taxable income, a taxpayer shall be allowed to deduct royalty payments directly or indirectly received from a related member during the taxable year to the extent included in the taxpayer's federal taxable income unless such royalty payments would not be required to be added back under subparagraph (B) of this paragraph or other similar provision in this chapter. (7) The amount of any deduction allowed pursuant to section one hundred ninety-nine of the internal revenue code must be added to federal unrelated business taxable income. (8) There must be added to federal unrelated business taxable income the amount of any federal deduction for taxes imposed under article twenty-three of this chapter. (b) If the period covered by a return under this article is other than the period covered by the return to the United States treasury department, unrelated business taxable income shall be determined by multiplying the unrelated business taxable income reported to such department (as modified pursuant to the provisions of this article) by the number of calendar months or major parts thereof covered by the return under this article and dividing by the number of calendar months or major part thereof covered by the return to such department. If it shall appear that such method of determining unrelated business taxable income does not properly reflect the taxpayer's income during the period covered by the return under this article, the tax commission shall be authorized, in its discretion, to determine such income solely on the basis of the taxpayer's income during the period covered by its return under this article.
§ 292. Unrelated business taxable income. (a) The unrelated business taxable income of a taxpayer subject to the tax imposed by section two hundred ninety shall be such taxpayer's federal unrelated business taxable income, as defined in the laws of the United States for the taxable year, with the following modifications: (1) There shall be added to federal unrelated business taxable income the amount of any tax imposed under this article. (2) There shall be subtracted from federal unrelated business taxable income the amount of any refund or credit for overpayment of a tax imposed under this article or article twenty-three of this chapter. (3) The net operating loss deduction which shall be allowed shall be the same as the net operating loss deduction allowed under paragraph six of subsection (b) of section five hundred twelve of the internal revenue code of nineteen hundred fifty-four, except that (A) any net operating loss included in determining such deduction shall be adjusted to reflect the addition and subtraction from unrelated business taxable income required by paragraphs one and two of this subdivision, (B) such deduction shall not include any net operating loss sustained during any taxable year beginning prior to January first, nineteen hundred seventy, or during any taxable year in which the taxpayer was not subject to the tax imposed by this article, and (C) such deduction shall not exceed the deduction for the taxable year allowable under paragraph six of subsection (b) of section five hundred twelve of the internal revenue code of nineteen hundred fifty-four. (4) There shall be subtracted from federal unrelated business taxable income any amount which is included therein solely by reason of the application of section 501(m)(2)(A) of the internal revenue code. (5) Shareholders of S corporations. (A) In the case of a shareholder of an S corporation, (i) where the election provided for in subsection (a) of section six hundred sixty of this chapter is in effect with respect to such corporation, there shall be added to federal unrelated business taxable income an amount equal to the shareholder's pro rata share of the corporation's reductions for taxes described in paragraphs two and three of subsection (f) of section thirteen hundred sixty-six of the internal revenue code, and (ii) where such election has not been made with respect to such corporation, there shall be subtracted from federal unrelated business taxable income any items of income of the corporation included therein, and there shall be added to federal unrelated business taxable income any items of loss or deduction included therein, and (iii) in the case of a New York S termination year, the amount of any such items of S corporation income, loss, deduction and reductions for taxes shall be adjusted in the manner provided in paragraph two or three of subsection (s) of section six hundred twelve of this chapter. (B) In the case of a shareholder of a corporation which was, for any of its taxable years beginning after nineteen hundred ninety-seven, a federal S corporation but a New York C corporation: (i) There shall be added to federal unrelated business taxable income S corporation distributions to the extent not included therein because of the application of section thirteen hundred sixty-eight or subsection (e) of section thirteen hundred seventy-one of the internal revenue code, which represent income not previously subject to tax under this article because the election provided for in subsection (a) of section six hundred sixty of this chapter had not been made. Any such distribution treated in the manner described in paragraph two ofsubsection (b) of such section thirteen hundred sixty-eight shall be treated as ordinary income for purposes of this article. (ii) Where gain or loss is included in unrelated business taxable income upon the disposition of stock or indebtedness of such corporation, (I) there shall be added to unrelated business taxable income the amount of increase in basis of such stock or indebtedness with respect to such New York C years of the corporation, pursuant to subparagraphs (A) and (B) of paragraph one of subsection (a) of section thirteen hundred sixty-seven of such code, and (II) there shall be subtracted from unrelated business taxable income the amount of decrease in such basis with respect to such New York C years of the corporation, pursuant to subparagraphs (B) and (C) of paragraph two of subsection (a) of such section thirteen hundred sixty-seven, and (III) there shall be subtracted from unrelated business taxable income the amount of modifications to unrelated business taxable income with respect to such stock pursuant to clause (i) of subparagraph (B) of this paragraph. (C) Cross reference. For definitions relating to S corporations, see subdivision one-A of section two hundred eight of this chapter. (6) Related members expense add back and income exclusion. (A) Definitions. (i) Related member or members. For purposes of this paragraph, the term related member or members means a person, corporation, or other entity, including an entity that is treated as a partnership or other pass-through vehicle for purposes of federal taxation, whether such person, corporation or entity is a taxpayer or not, where one such person, corporation, or entity, or set of related persons, corporations or entities, directly or indirectly owns or controls a controlling interest in another entity. Such entity or entities may include all taxpayers under article nine, nine-A, thirteen, twenty-two, thirty-two, thirty-three or thirty-three-A of this chapter. (ii) Controlling interest. A controlling interest shall mean (I) in the case of a corporation, either thirty percent or more of the total combined voting power of all classes of stock of such corporation, or thirty percent or more of the capital, profits or beneficial interest in such voting stock of such corporation, and (II) in the case of a partnership, association, trust or other entity, thirty percent or more of the capital, profits or beneficial interest in such partnership, association, trust or other entity. (iii) Royalty payments. Royalty payments are payments directly connected to the acquisition, use, maintenance or management, ownership, sale, exchange, or any other disposition of licenses, trademarks, copyrights, trade names, trade dress, service marks, mask works, trade secrets, patents and any other similar types of intangible assets as determined by the commissioner, and includes amounts allowable as interest deductions under section one hundred sixty-three of the internal revenue code to the extent such amounts are directly or indirectly for, related to or in connection with the acquisition, use, maintenance or management, ownership, sale, exchange or disposition of such intangible assets. (iv) Valid business purpose. A valid business purpose is one or more business purposes other than the avoidance or reduction of taxation which alone or in combination constitute the primary motivation for some business activity or transaction, which activity or transaction changes in a meaningful way, apart from tax effects, the economic position of the taxpayer. The economic position of the taxpayer includes an increasein the market share of the taxpayer, or the entry by the taxpayer into new business markets. (B) Royalty expense add backs. (i) For the purpose of computing New York unrelated business taxable income, a taxpayer must add back royalty payments to a related member during the taxable year to the extent deductible in calculating federal unrelated business taxable income; (ii) The add back of royalty payments shall not be required if and to the extent that such payments meet either of the following conditions: (I) the related member during the same taxable year directly or indirectly paid or incurred the amount to a person or entity that is not a related member, and such transaction was done for a valid business and the payments are made at arm's length; (II) the royalty payments are paid or incurred to a related member organized under the laws of a country other than the United States, are subject to a comprehensive income tax treaty between such country and the United States, and are taxed in such country at a tax rate at least equal to that imposed by this state. (C) Royalty income exclusions. For the purpose of computing New York unrelated business taxable income, a taxpayer shall be allowed to deduct royalty payments directly or indirectly received from a related member during the taxable year to the extent included in the taxpayer's federal taxable income unless such royalty payments would not be required to be added back under subparagraph (B) of this paragraph or other similar provision in this chapter. (7) The amount of any deduction allowed pursuant to section one hundred ninety-nine of the internal revenue code must be added to federal unrelated business taxable income. (8) There must be added to federal unrelated business taxable income the amount of any federal deduction for taxes imposed under article twenty-three of this chapter. (b) If the period covered by a return under this article is other than the period covered by the return to the United States treasury department, unrelated business taxable income shall be determined by multiplying the unrelated business taxable income reported to such department (as modified pursuant to the provisions of this article) by the number of calendar months or major parts thereof covered by the return under this article and dividing by the number of calendar months or major part thereof covered by the return to such department. If it shall appear that such method of determining unrelated business taxable income does not properly reflect the taxpayer's income during the period covered by the return under this article, the tax commission shall be authorized, in its discretion, to determine such income solely on the basis of the taxpayer's income during the period covered by its return under this article.
§ 292. Unrelated business taxable income. (a) The unrelated business taxable income of a taxpayer subject to the tax imposed by section two hundred ninety shall be such taxpayer's federal unrelated business taxable income, as defined in the laws of the United States for the taxable year, with the following modifications: (1) There shall be added to federal unrelated business taxable income the amount of any tax imposed under this article. (2) There shall be subtracted from federal unrelated business taxable income the amount of any refund or credit for overpayment of a tax imposed under this article or article twenty-three of this chapter. (3) The net operating loss deduction which shall be allowed shall be the same as the net operating loss deduction allowed under paragraph six of subsection (b) of section five hundred twelve of the internal revenue code of nineteen hundred fifty-four, except that (A) any net operating loss included in determining such deduction shall be adjusted to reflect the addition and subtraction from unrelated business taxable income required by paragraphs one and two of this subdivision, (B) such deduction shall not include any net operating loss sustained during any taxable year beginning prior to January first, nineteen hundred seventy, or during any taxable year in which the taxpayer was not subject to the tax imposed by this article, and (C) such deduction shall not exceed the deduction for the taxable year allowable under paragraph six of subsection (b) of section five hundred twelve of the internal revenue code of nineteen hundred fifty-four. (4) There shall be subtracted from federal unrelated business taxable income any amount which is included therein solely by reason of the application of section 501(m)(2)(A) of the internal revenue code. (5) Shareholders of S corporations. (A) In the case of a shareholder of an S corporation, (i) where the election provided for in subsection (a) of section six hundred sixty of this chapter is in effect with respect to such corporation, there shall be added to federal unrelated business taxable income an amount equal to the shareholder's pro rata share of the corporation's reductions for taxes described in paragraphs two and three of subsection (f) of section thirteen hundred sixty-six of the internal revenue code, and (ii) where such election has not been made with respect to such corporation, there shall be subtracted from federal unrelated business taxable income any items of income of the corporation included therein, and there shall be added to federal unrelated business taxable income any items of loss or deduction included therein, and (iii) in the case of a New York S termination year, the amount of any such items of S corporation income, loss, deduction and reductions for taxes shall be adjusted in the manner provided in paragraph two or three of subsection (s) of section six hundred twelve of this chapter. (B) In the case of a shareholder of a corporation which was, for any of its taxable years beginning after nineteen hundred ninety-seven, a federal S corporation but a New York C corporation: (i) There shall be added to federal unrelated business taxable income S corporation distributions to the extent not included therein because of the application of section thirteen hundred sixty-eight or subsection (e) of section thirteen hundred seventy-one of the internal revenue code, which represent income not previously subject to tax under this article because the election provided for in subsection (a) of section six hundred sixty of this chapter had not been made. Any such distribution treated in the manner described in paragraph two ofsubsection (b) of such section thirteen hundred sixty-eight shall be treated as ordinary income for purposes of this article. (ii) Where gain or loss is included in unrelated business taxable income upon the disposition of stock or indebtedness of such corporation, (I) there shall be added to unrelated business taxable income the amount of increase in basis of such stock or indebtedness with respect to such New York C years of the corporation, pursuant to subparagraphs (A) and (B) of paragraph one of subsection (a) of section thirteen hundred sixty-seven of such code, and (II) there shall be subtracted from unrelated business taxable income the amount of decrease in such basis with respect to such New York C years of the corporation, pursuant to subparagraphs (B) and (C) of paragraph two of subsection (a) of such section thirteen hundred sixty-seven, and (III) there shall be subtracted from unrelated business taxable income the amount of modifications to unrelated business taxable income with respect to such stock pursuant to clause (i) of subparagraph (B) of this paragraph. (C) Cross reference. For definitions relating to S corporations, see subdivision one-A of section two hundred eight of this chapter. (6) Related members expense add back and income exclusion. (A) Definitions. (i) Related member or members. For purposes of this paragraph, the term related member or members means a person, corporation, or other entity, including an entity that is treated as a partnership or other pass-through vehicle for purposes of federal taxation, whether such person, corporation or entity is a taxpayer or not, where one such person, corporation, or entity, or set of related persons, corporations or entities, directly or indirectly owns or controls a controlling interest in another entity. Such entity or entities may include all taxpayers under article nine, nine-A, thirteen, twenty-two, thirty-two, thirty-three or thirty-three-A of this chapter. (ii) Controlling interest. A controlling interest shall mean (I) in the case of a corporation, either thirty percent or more of the total combined voting power of all classes of stock of such corporation, or thirty percent or more of the capital, profits or beneficial interest in such voting stock of such corporation, and (II) in the case of a partnership, association, trust or other entity, thirty percent or more of the capital, profits or beneficial interest in such partnership, association, trust or other entity. (iii) Royalty payments. Royalty payments are payments directly connected to the acquisition, use, maintenance or management, ownership, sale, exchange, or any other disposition of licenses, trademarks, copyrights, trade names, trade dress, service marks, mask works, trade secrets, patents and any other similar types of intangible assets as determined by the commissioner, and includes amounts allowable as interest deductions under section one hundred sixty-three of the internal revenue code to the extent such amounts are directly or indirectly for, related to or in connection with the acquisition, use, maintenance or management, ownership, sale, exchange or disposition of such intangible assets. (iv) Valid business purpose. A valid business purpose is one or more business purposes other than the avoidance or reduction of taxation which alone or in combination constitute the primary motivation for some business activity or transaction, which activity or transaction changes in a meaningful way, apart from tax effects, the economic position of the taxpayer. The economic position of the taxpayer includes an increasein the market share of the taxpayer, or the entry by the taxpayer into new business markets. (B) Royalty expense add backs. (i) For the purpose of computing New York unrelated business taxable income, a taxpayer must add back royalty payments to a related member during the taxable year to the extent deductible in calculating federal unrelated business taxable income; (ii) The add back of royalty payments shall not be required if and to the extent that such payments meet either of the following conditions: (I) the related member during the same taxable year directly or indirectly paid or incurred the amount to a person or entity that is not a related member, and such transaction was done for a valid business and the payments are made at arm's length; (II) the royalty payments are paid or incurred to a related member organized under the laws of a country other than the United States, are subject to a comprehensive income tax treaty between such country and the United States, and are taxed in such country at a tax rate at least equal to that imposed by this state. (C) Royalty income exclusions. For the purpose of computing New York unrelated business taxable income, a taxpayer shall be allowed to deduct royalty payments directly or indirectly received from a related member during the taxable year to the extent included in the taxpayer's federal taxable income unless such royalty payments would not be required to be added back under subparagraph (B) of this paragraph or other similar provision in this chapter. (7) The amount of any deduction allowed pursuant to section one hundred ninety-nine of the internal revenue code must be added to federal unrelated business taxable income. (8) There must be added to federal unrelated business taxable income the amount of any federal deduction for taxes imposed under article twenty-three of this chapter. (b) If the period covered by a return under this article is other than the period covered by the return to the United States treasury department, unrelated business taxable income shall be determined by multiplying the unrelated business taxable income reported to such department (as modified pursuant to the provisions of this article) by the number of calendar months or major parts thereof covered by the return under this article and dividing by the number of calendar months or major part thereof covered by the return to such department. If it shall appear that such method of determining unrelated business taxable income does not properly reflect the taxpayer's income during the period covered by the return under this article, the tax commission shall be authorized, in its discretion, to determine such income solely on the basis of the taxpayer's income during the period covered by its return under this article.
