Tax Rules for Banks

Section 1. The tax law is amended by adding a new article 32 to read as follows:

ARTICLE 32

FRANCHISE TAX ON BANKING CORPORATIONS Section 1450. General definitions.

1451. Imposition of tax.

1452. Banking corporation defined; exempt corporations.

1453. Computations of entire net income.

1453-A. Computation of alternative entire net income.

1454. Allocation.

1455. Computation of tax.

1455-A. Tax surcharge.

1455-B. Temporary metropolitan transportation business tax

surcharge on banks.

1456. Credits.

1460. Declarations of estimated tax.

1461. Payments of estimated tax.

1462. Returns.

1463. Payment of tax.

1466. Deposit and disposition of revenue.

1467. Secrecy required of officials; penalty for violation.

1468. Procedural provisions.

§ 1450. General definitions. As used in this article:

(a) The word "taxpayer" means a corporation or association subject to a tax imposed by this article.

EXPLANATION--Matter in italics (underscored) is new; matter in brackets

[ ] is old law to be omitted.

LBD07753-02-9

A. 8552 2

(b) The phrase "taxable year" means the taxpayer's taxable year for federal income tax purposes, or the part thereof during which the taxpayer is subject to the tax imposed by this article.

(c) The term "international banking facility" shall mean an international banking facility located in New York state and shall have the same meaning as is set forth in the New York state banking law or regulations of the New York state department of financial services or as is set forth in the laws of the United States or regulations of the board of governors of the federal reserve system.

(d) The term "subsidiary" means a corporation or association of which over fifty percent of the number of shares of stock entitling the holders thereof to vote for the election of directors or trustees is owned by the taxpayer.

(e) The term "subsidiary capital" means investments in the stock of subsidiaries and any indebtedness from subsidiaries, exclusive of accounts receivable acquired in the ordinary course of trade or business for services rendered or for sales of property held primarily for sale to customers, whether or not evidenced by written instrument, on which interest is not claimed and deducted by the subsidiary for purposes of taxation under this article, article nine-A or thirty-three of this chapter, provided, however, there shall be deducted from subsidiary capital any liabilities payable by their terms on demand or within one year from the date incurred, other than loans or advances outstanding for more than a year as of any date during the year covered by the return, which are attributable to subsidiary capital.

(f) The terms "New York S corporation", "New York S year", "New York S election", "New York C corporation", "New York C year", "termination year", "S short year", "C short year", and "New York S termination year" shall have the same meaning as those terms have under subdivision one-A of section two hundred eight of this chapter, except that references in such subdivision to article nine-A of this chapter shall be read as references to this article.

(g) The term "QSSS" means a corporation which is a qualified subchapter S subsidiary as defined in subparagraph (B) of paragraph three of subsection (b) of section thirteen hundred sixty-one of the internal revenue code. The term "exempt QSSS" means a QSSS exempt from tax under this article as provided in subsection (o) of section fourteen hundred fifty-three of this article, or a QSSS described in clause (i) of subparagraph (B) of paragraph two of subsection (o) of section fourteen hundred fifty-three, wherein the parent corporation of the QSSS is subject to tax under this article, and the assets, liabilities, income and deductions of the QSSS are treated as the assets, liabilities, income and deductions of the parent corporation. Where a QSSS is an exempt QSSS, then for all purposes under this article:

(1) the assets, liabilities, income, deductions, property, payroll, receipts, capital, credits, and all other tax attributes and elements of economic activity of the QSSS shall be deemed to be those of the parent corporation,

(2) the stocks, bonds and other securities issued by, and any indebtedness from, the QSSS shall not be subsidiary capital of the parent corporation,

(3) transactions between the parent corporation and the QSSS, including the payment of interest and dividends, shall not be taken into account, and

(4) general executive officers of the QSSS shall be deemed to be general executive officers of the parent corporation.

A. 8552 3

(h) The term "financial holding company" means a corporation that, pursuant to subsection (l) of section 4 of the federal bank holding company act of nineteen hundred fifty-six, as amended, has filed with the federal reserve board a written declaration that the corporation elects to be a financial holding company and whose election has not been found to be ineffective by the federal reserve board.

§ 1451. Imposition of tax. (a) For the privilege of exercising its franchise or doing business in this state in a corporate or organized capacity, a tax, computed under section fourteen hundred fifty-five of this article, is hereby annually imposed on every banking corporation for each of its taxable years, or any part thereof, beginning on or after January first, nineteen hundred seventy-three.

(b) In the case of a taxpayer whose taxable year is other than a calendar year, there is hereby imposed a tax for the privilege of exercising its franchise or doing business in this state in a corporate or organized capacity for the period beginning January first, nineteen hundred seventy-three and extending through the subsequent part of its first such taxable year ending after such date. Such tax shall be computed under section fourteen hundred fifty-five of this article on the basis of such taxpayer's entire net income, or other applicable basis as the case may be, for such period and shall be paid with a return which shall be separately filed with the tax commission not later than the fifteenth day of the third month succeeding the close of such period. The requirements of sections fourteen hundred sixty and fourteen hundred sixty-one of this article, relating to declarations and payments of estimated tax, except subsection (a) of section fourteen hundred sixty-one of this article, shall not be applicable to the tax imposed by this subsection.

(c)(1) A banking corporation is doing business in this state in a corporate or organized capacity if (i) it has issued credit cards to one thousand or more customers who have a mailing address within this state as of the last day of its taxable year, (ii) it has merchant customer contracts with merchants and the total number of locations covered by those contracts equals one thousand or more locations in this state to whom the banking corporation remitted payments for credit card transactions during the taxable year, (iii) it has receipts of one million dollars or more in the taxable year from its customers who have been issued credit cards by the banking corporation and have a mailing address within this state, (iv) it has receipts of one million dollars or more arising from merchant customer contracts with merchants relating to locations in this state, or (v) the sum of the number of customers described in subparagraph (i) of this paragraph plus the number of locations covered by its contracts described in subparagraph (ii) of this paragraph equals one thousand or more, or the amount of its receipts described in subparagraphs (iii) and (iv) of this paragraph equals one million dollars or more. For purposes of this paragraph, receipts from processing credit card transactions for merchants include merchant discount fees received by the banking corporation.

(2) As used in this subsection, the term "credit card" includes bank, credit, travel and entertainment cards.

§ 1452. Banking corporation defined; exempt corporations. (a) For the purpose of this article, a banking corporation means:

(1) Every corporation or association organized under the laws of this state which is authorized to do a banking business, or which is doing a banking business;

A. 8552 4

(2) every corporation or association organized under the laws of any other state or country which is doing a banking business;

(3) every national banking association organized under the authority of the United States which is doing a banking business;

(4) every federal savings bank which is doing a banking business;

(5) every federal savings and loan association which is doing a banking business;

(6) a production credit association organized under the federal farm credit act of nineteen hundred thirty-three, which is doing a banking business and all of whose stock held by the federal production credit corporation has been retired;

(7) every other corporation or association organized under the authority of the United States which is doing a banking business;

(8) the mortgage facilities corporation created by chapter five hundred sixty-four of the laws of nineteen hundred fifty-six;

(9) any corporation sixty-five percent or more of whose voting stock is owned or controlled, directly or indirectly, by a corporation or corporations 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 and loan holding company (but excluding a diversified savings and loan holding company) under the federal national housing act, as amended, or by a corporation or corporations described in any of the foregoing paragraphs of this subsection, provided the corporation whose voting stock is so owned or controlled is principally engaged in a business, regardless of where conducted, which (i) might be lawfully conducted by a corporation subject to article three of the banking law or by a national banking association, or (ii) is so closely related to banking or managing or controlling banks as to be a proper incident thereto, as set forth in paragraph eight of subsection (c) or subparagraph (F) of paragraph four of subsection (k) of section four of the federal bank holding company act of nineteen hundred fifty-six, as amended, or (iii) holds and manages investment assets, including but not limited to bonds, notes, debentures and other obligations for the payment of money, stocks, partnership interests or other equity interests, and other investment securities and which is not a business described in subparagraph (i) or (ii) of this paragraph; and provided, further, that in no event shall a corporation principally engaged in a business described in section one hundred eighty-three or one hundred eighty-four, or section one hundred eighty-six as it was in effect on December thirty-first, nineteen hundred ninety-nine, of this chapter be subject to the tax imposed under this article if any of its business receipts from such principally engaged in business are from other than a corporation (A) which owns or controls, directly or indirectly, sixty-five percent or more of its voting stock, or (B) sixty-five percent or more of whose voting stock is owned or controlled, directly or indirectly, by the corporation engaged in such business, or (C) sixty-five percent or more of whose voting stock is owned or controlled, directly or indirectly, by the same interest.

(b) Banking business defined. The words "banking business" as used in this section mean such business as a corporation or association may be created to do under article three, three-B, five, five-A, five-C, six or ten of the banking law or any business which a corporation or association is authorized by such article to do. However, with respect to a national banking association organized under the authority of the United States, a federal savings bank, a federal savings and loan association

A. 8552 5

or a production credit association, the words "banking business" as used in this section mean such business as a national banking association, federal savings bank, federal savings and loan association or production credit association, respectively, may be created to do or is authorized to do under the laws of the United States or this state. The words "banking business" as used in this section shall also mean such business as any corporation or association organized under the authority of the United States or organized under the laws of any other state or country has authority to do which is substantially similar to the business which a corporation or association may be created to do under article three, three-B, five, five-A, five-C, six or ten of the banking law or any business which a corporation or association is authorized by such article to do.

(c) Exempt corporations. A trust company all of whose capital stock is owned by twenty or more savings banks organized under New York law shall be exempt from the tax under this article.