state which is not a branch, it shall be presumed that the greater portion of income producing activity related to such loan or financing lease occurred within this state if the taxpayer had a branch within this state at the time the loan or financing lease was made. The taxpayer may rebut such presumption by demonstrating that the greater portion of income producing activity related to the loan or financing lease did not occur within this state.

a

(ii) In the case of a taxpayer described in paragraph six or nine of subsection (a) of section fourteen hundred fifty-two of this article, loan or financing lease attributed by such taxpayer to a bona fide office without the state shall be presumed to be properly SO attributed provided that such presumption may be rebutted if the tax commission demonstrates that the greater portion of income producing activity related to the loan or financing lease did not occur without this state. (C) Receipts from lease transactions other than financing leases referred to in subparagraph (B) are located where the property subject to the lease is located.

(D) (i) Interest, and fees and penalties in the nature of interest, from bank, travel and entertainment card receivables are earned within the state if the card holder's domicile is in the state, and

(ii) Service charges and fees from such cards are earned within the state if the card is serviced in the state; and

(iii) Receipts from merchant discounts are earned within the state if the merchant is located within the state.

(E) Net gains and losses and other income from trading activities (including but not limited to foreign exchange, options and financial futures), and net gains and losses and other income from investment activities, shall be attributed within the state if the greater portion of income producing activity related to the trading activities and investment activities occurred within the state.

(F) Fees or charges from the issuance of letters of credit, travelers checks and money orders are earned within the state if such letters of credit, travelers checks or money orders are issued within the state.

(G) All receipts from the performance of services not described above are earned within the state if the services are performed in the state. When a service is performed both within and without the state, the receipts shall be allocated within and without the state in accordance with rules and regulations of the tax commission.

in

(H) All other receipts not described in subparagraphs (B) through (G) of this paragraph shall be attributable within and without the state accordance with rules and regulations issued by the tax commission.

(3) The taxpayer shall ascertain the percentage which the average value of deposits maintained at branches within the state during the taxable year, bears to the average value of all the taxpayer's deposits maintained at branches within and without the state during the taxable

year.

(4) Each percentage computed pursuant to this subsection shall be computed on a cash or accrual basis according to the method of accounting used for the taxable year. The receipts percentage shall include only receipts which are included in alternative entire net income for the taxable year. The deposits and payroll percentages shall include only deposits and payroll the expenses of which are included in the computation of alternative entire net income for the taxable year. (5) For purposes of this section:

(A) The term "bona fide office" means an office at which the taxpayer carries on its business in a regular and systematic manner and which is continuously maintained, occupied and used by employees of the taxpayer. (B) The term "branch" means a bona fide office which is used by the taxpayer on a regular and systematic basis to (i) approve loans (regardless of whether the approval of certain classes of loans requires review or final approval by another office of the taxpayer), (ii) accept loan repayments, (iii) disburse funds, and (iv) conduct one or more other functions of a banking business.

(6) If it shall appear to the tax commission that the allocation percentage determined in subsection (b), (c), or (d) of this section does not properly reflect the activity, business, income or assets of a taxpayer within the state, the tax commission shall be authorized in its discretion to adjust it by (1) excluding one or more of the factors therein, (2) including one or more other factors, or (3) any other similar or different method calculated to effect a fair and proper allocation of the income or assets reasonably attributable to the state.

(7) The tax commission from time to time shall publish all rulings of general public interest with respect to any application of the provisions of paragraph six of this subsection.

(b) Allocation of entire net income.

(1) If a taxpayer's entire net income is derived from business carried on both within and without the state, the portion thereof which is derived from business carried on within the state shall be determined by multiplying its entire net income by the income allocation percentage determined as follows: add the percentages ascertained under paragraphs one, two and three of subsection (a) of this section, plus an additional percentage equal to the receipts percentage ascertained under paragraph two of such subsection and an additional percentage equal to the deposits percentage ascertained under paragraph three of such subsection, and divide the result by the number of percentages so added together.

tax

(2) (A) In lieu of the modification provided for in subsection (f) of section fourteen hundred fifty-three of this article, (relating to a modification for the adjusted eligible net income of an international banking facility), a taxpayer may, in the manner prescribed by the commission, elect to modify on an annual basis its income allocation percentage in the manner described in clauses (i), (ii) and (iii) below: (i) wages, salaries and other personal service compensation properly attributable to the production of eligible gross income of the taxpayer's international banking facility shall not be included in the computation of wages, salaries and other personal service compensation of employees within the state,

(ii) receipts properly attributable to the production of eligible gross income of the taxpayer's international banking facility shall not be included in the computation of receipts within the state, and

(iii) deposits from foreign persons which are properly attributable to the production of eligible gross income of the taxpayer's international banking facility shall not be included in the computation of deposits maintained at branches within the state.

(B) For purposes of this paragraph, the term "eligible gross income" refers to such term as set out in subsection (f) of section fourteen hundred fifty-three of this article except that the term "foreign person" as defined in paragraph eight of such subsection (f) shall not include a foreign branch of the taxpayer and in no event shall transactions between the taxpayer's international banking facility and its foreign branches be considered.

(c) Allocation of alternative entire net income. If a taxpayer's alternative entire net income is derived from business carried on both within and without the state, the portion thereof which is derived from business carried on within the state shall be determined by multiplying its alternative entire net income by the alternative entire net income allocation percentage determined as follows:

(1) Recompute the payroll percentage under paragraph one of subsection (a) of this section without giving consideration to the phrase "eighty percent of," add to the resulting percentage the percentages ascertained under paragraphs two and three of such subsection, and divide the result by the number of percentages so added together.

(2) When an election has been made pursuant to paragraph two of subsection (b) of this section (relating to international banking facilities) the taxpayer shall make the modifications described in such paragraph for purposes of its alternative entire net income allocation percentage.

(d) Allocation of taxable assets. If the taxpayer's taxable assets are derived from business carried on both within and without the state, the portion thereof which is derived from business carried on within the state shall be determined by multiplying its taxable assets by an asset allocation percentage determined in the same manner as the income allocation percentage under subsection (b) of this section, determined as if the election provided for in paragraph two of such subsection has been made, except that the modifications described in clauses (i), (ii) and (iii) of subparagraph (A) of such paragraph shall not be made.

§ 23. Subsection (a) of section fourteen hundred fifty-five of such law, as amended by chapte eight hundred ninety-five of the laws of nineteen hundred seventy-five, is amended to read as follows:

EXPLANATION-Matter in italics is new; matter in brackets [ ] is old law

(a) Basic tax. [Twelve] Nine percent of the taxpayer's entire net income, or the portion thereof allocated to this state, for the taxable year, or part thereof.

§ 24. Subsection (b) of section fourteen hundred fifty-five of such law is repealed and a new subsection (b) is added to read as follows: (b) Alternative minimum tax. If the tax under subsection (a) of this section is less than any of the following amounts, the tax shall be the larger of the following amounts:

(1) (i) Except in the case of a taxpayer described in clause (ii), (iii), or (iv) below, one-tenth of a mill upon each dollar of taxable assets, or the portion thereof allocated to this state.

(ii) In the case of a taxpayer whose net worth ratio is less than five but greater than or equal to four percent and whose total assets are comprised of thirty-three percent or more of mortgages, one-twenty-fifth of a mill upon each dollar of taxable assets, or the portion thereof allocated to this state.

(iii) In the case of a taxpayer whose net worth ratio is less than four percent of the average total value of all its assets and whose total assets are comprised of thirty-three percent or more of mortgages, one-fiftieth of a mill upon each dollar of taxable assets, or the portion thereof allocated to this state.

be

(iv) For taxable years beginning on or after January first, nineteen hundred eighty-five, a taxpayer (whether or not a qualified institution as defined in subparagraph (B) of paragraph five of subsection (f) of section four hundred six of the federal national housing act, as amended, or as defined in paragraph two of subsection (i) of section thirteen of the federal deposit insurance act, as amended) shall not subject to the provisions of this paragraph for that portion of the taxable year in which it had outstanding net worth certificates issued in accordance with paragraph five of subsection (f) of section four hundred six of the federal national housing act, as amended, or issued in accordance with subsection (i) of section thirteen of the federal deposit insurance act, as amended.

(v) For the purposes of this article:

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(A) The term "taxable assets" shall mean the average total value of those assets which are properly reflected on a balance sheet the income or expenses of which are properly reflected (or would have been properly reflected if not fully depreciated or expensed or depreciated or pensed to a nominal amount) in the computation of alternative entire net income for the taxable year or in the computation of the eligible net income of the taxpayer's international banking facility for the taxable year. Provided, however, taxable assets shall not include any amount of money or other property received from or attributable to amounts received from the federal deposit insurance corporation pursuant to subsection (c) of section thirteen of the federal deposit insurance act, as amended, or the federal savings and loan insurance corporation pursuant to paragraph one, two, three or four of subsection (f) of section four hundred six of the federal national housing act, as amended; and provided further, for taxpayers whose taxable assets are comprised of twenty percent or more of interbank placements, taxable assets shall not include interbank placements of funds, up to an amount not exceeding five hundred million dollars.

(B) The term "net worth ratio" shall mean the percentage of net worth to assets where the term "net worth" and "assets" are determined in the same manner as determined under clause (i) of subparagraph (B) of paragraph five of subsection (f) of section four hundred six of the federal national housing act, or regulations promulgated thereunder, as such clause and regulations were in effect on June first, nineteen hundred eighty-five.

(C) The term "mortgages" shall mean loans secured by real property within or without the state, participations in and securities collateralized by pools of residential mortgages, whether or not issued or guaranteed by a United States government agency, and loans secured by stock in a cooperative housing corporation. The percentage of total assets comprised of mortgages shall be an amount equal to the ratio of the average of the four quarterly balances of such mortgages ending within the taxable year, to the average of the four quarterly balances of all assets ending within the taxable year. Such quarterly balances shall be computed in the same manner as the report of condition required for federal deposit insurance corporation or federal savings and loan insurance corporation purposes, whether or not such report is required. For taxable period's of less than one year, the taxpayer shall compute such

ratio using the number of such quarterly balances ending within such taxable period. (D) The term "interbank placements" shall mean the average value of interest-bearing funds, with a maturity of less than one year, placed or deposited by a taxpayer with a banking corporation other than one described in paragraph nine of subsection (a) of section fourteen hundred fifty-two of this article (whether or not a taxpayer) provided such banking corporation is not one (I) which owns or controls, directly or indirectly, sixty-five percent or more of such taxpayer's voting stock, or (II) sixty-five percent or more of whose voting stock is owned or controlled, directly or indirectly, by such taxpayer, or (III) sixtyfive percent or more of whose vot ing stock is owned or controlled, directly or indirectly, by the same interest.

(2) Three percent of the taxpayer's alternative entire net income, or portion thereof allocated to this state, for the taxable year, or part thereof.

Two dollars.

(3) 25. Shundred fifty del section fourteen hundred fifty-five-B of such

law, as amended by chapter nine hundred ninety-nine of the laws of nineteen hundred eighty-four, is amended to read as follows:

1. For the privilege of exercising its franchise or doing business in the metropolitan commuter transportation district in a corporate or organized capacity, there is hereby imposed on every taxpayer subject to tax under this article for the taxable years commencing on or after January first, nineteen hundred eighty-two but ending before December thirty-first, nineteen hundred eighty-six, a tax surcharge, in addition to the tax imposed under section fourteen hundred fifty-one of this article, at the rate of eighteen per centum of the tax imposed under such section fourteen hundred fifty-one, for such taxable years or any part of such taxable years ending before December thirty-first, nineteen hundred eighty-three after the deduction of any credits otherwise allowable under this article, and at the rate of seventeen per centum of the tax imposed under such section for such taxable years or any part of such taxable years ending on or after December thirty-first, nineteen hundred eighty-three after the deduction of any credits otherwise allowable under this article; provided however, that such rates of tax surcharge shall be applied only to that portion of the tax imposed under section fourteen hundred fifty-one of this article after the deduction of any credits otherwise allowable under this article after the deduction of any credits otherwise allowable under this article which is attributable to the taxpayer's business activity carried on within the metropolitan commuter transportation district; [and provided, further, that if the tax imposed under section fourteen hundred fifty-one of this article is computed pursuant to the provisions of paragraph three of subdivision (b) of section fourteen hundred fifty-five of this article, no tax surcharge shall be imposed under this section; ] and provided, further, that the tax surcharge imposed by this section shall not be imposed upon any taxpayer for more than forty-eight months.

§ 26. Subsection (d) of section fourteen hundred fifty-six of such law is repealed.

§ 27. Subsection (f) of section fourteen hundred sixty-two of such law is repealed and two new subsections (f) and (g) are added to read as follows:

(f) (1) For purposes of this subsection, the term "bank holding Company" means any corporation subject to article three-A of the banking law, or registered under the federal bank holding company act of nineteen hundred fifty-six, as amended, or registered as a savings loan holding company (but excluding a diversified savings and loan holding company) under the federal national housing act, as amended.

and

(2) (1) Any banking corporation or bank holding company which is exercising its corporate franchise or doing business in this state in a corporate or organized capacity, and

(A) which owns or controls, directly or indirectly, eighty percent or more of the voting stock of one or more bank ing corporations or bank holding companies, or

(B) whose voting stock is eighty percent or more owned or controlled, directly or indirectly, by a banking corporation or a bank holding company,

EXPLANATION-Matter in italics is new; matter in brackets [] is old law

shall make a return on a combined basis under this article covering itself and such corporations described in clause (A) or (B) and shall set forth such information as the tax commission may require unless the taxpayer or the tax commission shows that the inclusion of such a corporation in the combined return fails to properly reflect the tax liability of such corporation under this article. Provided, however, that no banking corporation or bank holding company not a taxpayer shall be subject to the requirements of this subparagraph unless the tax commission deems that the application of such requirements is necessary in order to properly reflect the tax liability under this article, because of intercompany transactions or some agreement understanding, arrangement or transaction of the type referred to in subsection (g) of this section. (ii) In the discretion of the tax commission, any banking corporation or bank holding company which is exercising its corporate franchise doing business in this state in a corporate or organized capacity, and (A) which owns or controls, directly or indirectly, sixty-five percent or more of the voting stock of one or more banking corporations or bank holding companies, or

or

(B) whose voting stock is sixty-five percent or more owned or controlled, directly or indirectly, by a banking corporation or a bank holding company,

may be required or permitted to make a return on a combined basis under this article covering itself and such corporations described in clause (A) or (B) and shall set forth such information as the tax commission may require; provided, however, that no combined return shall be required or permitted unless the tax commission deems such report necessary in order to properly reflect the tax liability under this article of any one or more of such banking corporations or bank holding companies.

one or

(iii) In the discretion of the tax commission, banking corporations or bank holding companies which are sixty-five percent or more owned or controlled, directly or indirectly, by the same interest may be permitted or required to make a return on a combined basis under this article and shall set forth such information as the tax commission may require, if at least one such banking corporation or bank holding company is exercising its corporate franchise or doing business in this state in a corporate or organized capacity. No combined return shall be required or permitted unless the tax commission deems such report necessary in order to properly reflect the tax liability under this article of any more of such banking corporations or bank holding companies. (3) In the case of a combined return, the tax shall be measured by the combined entire net income, combined alternative entire net income or combined assets of all the corporations included in the return. The allocation percentage shall be computed based on the combined factors with respect to all the corporations 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 intercorporate bills, notes and accounts receivable and payable and other intercorporate indebtedness shall be eliminated.

(4) (i) In no event shall an item of income or expense of a corporation organized under the laws of a country other than the United States be included in a combined return unless it is includible in entire net income or alternative entire net income, as the case may be, nor shall an asset of such a corporation be included in a combined return unless it is included in taxable assets.

(ii) In no event shall a corporation organized under the laws of the United States, this state or any other state, be included in a combined return with a corporation organized under the laws of a country other than the United States.

(iii) In no event shall a corporation which has made an election pursuant to subsection (d) of section fourteen hundred fifty-two of this article to be subject to the tax imposed by article nine-a of this chapter be included in a combined return for those taxable years for which it is subject to the tax imposed by article nine-a of this chapter.

(iv) In no event shall a corporation whose net worth ratio is less than five percent and whose total assets are comprised of thirty-three percent or more of mortgages be included in a combined return for those taxable years for which its tax is determined pursuant to subparagraph (ii) or (iii) of paragraph one of subsection (b) of section fourteen hundred fifty-five of this article.