New York City—Corporate Income, Miscellaneous Taxes: Guidance Issued on Requests to Use Alternative Allocation Method

The New York City Department of Finance has issued a general corporation tax and unincorporated business tax notice regarding requests for permission to use an alternative allocation method. A taxpayer's business allocation percentage must be computed using the method prescribed by statute, and the tax paid accordingly, unless prior consent to use a different allocation method has been obtained from the department.

If a taxpayer believes that using the statutory method of allocation does not lead to a result that fairly and equitably reflects New York City income, the taxpayer may obtain the department’s consent to use a different allocation method by submitting a written request, separate and apart from the tax return, describing the alternative method. This is a change from the procedure that was in place in past years, in which an alternative method could be requested by checking a box on the return and submitting information with the return.

The request, which is applicable only to a single tax year, may be made before or after the filing of the return. Unless consent to use an alternative method is granted prior to the filing of the return, the statutory method for allocation must be used on the return.

The written request must fully explain the proposed alternative allocation method. The explanation must provide full information regarding the nature and scope of the business activities carried on within and outside New York City and provide complete details of how the proposed method would allocate income on a more equitable basis than the statutory method. The taxpayer must submit calculations of the tax due under both the statutory method and the proposed alternative method.

If the department consents to the use of the proposed alternative method of allocation and it results in a lower tax liability than the formula basis upon which the tax paid was calculated, the taxpayer may be entitled to claim a refund of the excess amount paid.