Instructions For Form Nyc-202 - Unincorporated Business Tax Return

Instructions for Form NYC-202 2006

Page 10

Finance determines that the use of books and

for each business and attached to your return.

raw materials into wares, and giving new

records does not fairly reflect the taxpayer’s

shapes, qualities or combinations to matter

Security and commodity brokers should refer to

income from the City. Similarly, the election

that has already gone through some artificial

19 RCNY Section 28-07(h) for special rules for

will be deemed revoked as of the beginning of

process, through the use of machinery, tools,

allocating commissions, manager fees, primary

any tax year, if the Department of Finance

appliances or other similar equipment. A busi-

spreads, and selling concessions.

determines that the use of books and records

ness is primarily engaged in manufacturing if

does not fairly reflect the taxpayer’s income

more than 50% of its gross receipts for the

SCHEDULE C, PARTS 1 AND 2

from the City for that year. A taxpayer may

year are attributable to manufacturing.

Enter the information requested in parts 1 and

revoke the election for any tax year by filing a

After the business allocation percentage is

2, all columns. Indicate in the “rent” column

return using another permitted allocation

computed, multiply Schedule A, line 4 by the

whether you own or rent the premises listed.

method. However, the revocation will not be

business allocation percentage to determine

Enter the amount of rent paid, if any. (Attach

effective if the Department determines that the

the amount allocated to New York City. Enter

rider if necessary.)

other method does not fairly reflect the taxpay-

the result on Schedule A, line 5.

er’s income from the City. Once the election

SCHEDULE C, PART 3

has been revoked or is deemed revoked, the

The three factors are described below in the

Compute the business allocation percentage

taxpayer may not use the books and records

instructions for lines 1a, 1b, 1c, 2 and 3.

by means of the three-factor formula as fol-

allocation method for any subsequent year.

Complete lines 1a, 1b, 1c, and 1d of Schedule

lows:

See section 11-508(b)(2) of the NYC Ad. Code

C, part 3, to determine the average value of

the property factor (line 1)

as amended by Ch. 633 of the Laws of 2005.

real and tangible personal property of the busi-

the payroll factor (line 2)

Eligible taxpayers who have made the election

ness.

the gross income factor (line 3)

to allocate using the books and records method

must complete Schedule C, parts 1 and 2 and

LINE 1a - REAL PROPERTY OWNED

Each factor is computed by dividing the

attach a detailed schedule showing the source

Enter in column A the average value of real

amount in column A by the amount in column

of each item of income and expense as being

property located within New York City. Enter

B. The resulting percentages are added togeth-

attributable inside and outside the City.

in column B the average value of real proper-

er, the sum is divided by the number of per-

ty connected with the business both inside and

centages, and the resulting allocation percent-

ALLOCATION BY FORMULA

outside New York City.

For this purpose,

age rounded to the nearest one hundredth of a

Unless you are electing to use the books and

property connected with the business does not

percentage point is entered on line 5. If one of

records method, income from business carried

include property from which the taxpayer

the factors is missing, the other percentages

on both inside and outside New York City

solely receives rental income not considered

are added and the sum is divided by the num-

must be determined in accordance with the

income from an unincorporated business. See

ber of percentages. If two of the factors are

statutory formula or an alternative method

“Who is subject to the Tax,” paragraph 6. The

missing, the remaining percentage is the allo-

approved by the Department of Finance.

average value of the property is determined by

cation percentage. A factor is not missing

Schedule C, parts 1, 2 and 3 must be complet-

adding:

merely because its numerator is zero, but is

ed for this purpose in accordance with the fol-

missing if both its numerator and denominator

its value at the beginning of the taxable

lowing specific instructions.

year, and

are zero.

An unincorporated business that derives more

its value at the end of the taxable year,

than 10% of its gross receipts for the taxable

EXAMPLE

and dividing by two.

A taxpayer has no employees either inside or

year from publishing newspapers or periodi-

outside New York City and pays no wages.

cals or radio or television broadcasting must

LINE 1b - REAL PROPERTY RENTED

The allocation percentage is computed by

allocate all its income using the statutory for-

FROM OTHERS

adding the property percentage and the gross

mula unless the Department of Finance

The value of real property rented to the busi-

income percentage and dividing the total by

requires an alternative method to be used in

ness and to be included in line 1b is generally

two.

order to fairly and equitably reflect the taxpay-

eight times the gross rent payable during the

er’s business income in the City.

taxable year for which the return is filed.

For taxable years beginning after 6/30/96, a

Gross rent includes:

manufacturing business may elect to use a

ALTERNATIVE ALLOCATION

double-weighted gross income factor.

any amount payable for the use or pos-

METHOD

election must be made on a timely filed origi-

session of real property, or any part there-

If Schedule C, part 3 does not fairly and equi-

nal return and is made by entering on line 3b

of, whether designated as a fixed sum of

tably reflect the income from New York City

the amount from line 3a. If you make an elec-

money or as a percentage of sales, profits

and you use an alternate method, you must still

tion, add the percentages in Column C and

or otherwise; and

complete Schedule C, part 3, based upon the

divide the sum by 4 and enter the result on line

statutory formula, and attach a detailed expla-

any amount payable as additional rent or

5 rounded to the nearest one hundredth of a

nation of the alternate allocation method used

in lieu of rent, such as interest, taxes,

percentage point. If one or more of the other

to determine New York City income, together

insurance, repairs or any other amount

factors is missing, add the remaining percent-

with full details of any modification increasing

required to be paid by the terms of a lease

age(s) and divide by the number of percent-

or decreasing the amount of New York City

or other agreement; and

ages so added. If you do not wish to make

income computed by use of the alternate

the election, do not enter an amount on line

that proportion of the cost of any

method and how the alternative method is

3b. For purposes of this election, a manufac-

improvement to real property made by or

more equitable than the statutory formula.

turing business is an unincorporated business

on behalf of the business which reverts to

primarily engaged in the manufacturing and

the owner or lessor upon termination of a

If you carried on more than one business for

sale

tangible

personal

property.

lease or other agreement.

which an alternative allocation method is

Manufacturing includes assembly, working

required, a similar statement must be prepared

Instructions For Form Nyc-202 - Unincorporated Business Tax Return - 2006 Page 10

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