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(5) Tax liability under this article may be deemed to be improperly reflected because of intercompany transactions or some agreement, understanding, arrangement transaction referred to in subsection (8) of this section.

(8) In case it shall appear to the tax commission that any agreement, understanding or arrangement exists between the taxpayer and any other corporation any person or firm, whereby the activity, business, income or assets of the taxpayer within the state is improperly

inaccurately reflected, the tax commission is authorized and empowered, in its discretion and in such manner as it may determine, to ad just items of income deductions in computing entire net income or alternative entire net income and to adjust assets, and to ad just wages, salaries and other personal service compensation, receipts or deposits in computing any allocation percentage, provided only that entire net income alternative entire net income be adjusted accordingly, and that any, asset directly traceable to the elimination of any receipt be eliminated from assets so as to accurately determine the tax. If however, in the determination of the tax commission, such adjustments do not, or cannot effectively provide for the accurate determination of the tax, the commission shall be authorized to require the filing of a combined report by the taxpayer

such other corporations. Where (1) any taxpayer conducts its activity or business under any agreement, arrangement understanding in such manner as either directly or indirectly to benefit its members or stockholders, or any of them, or any person persons directly indirectly interested in such' activity or business, by entering into any transaction at more or less than a fair price which, but for such agreement, arrangement or understanding, might have been paid or received therefor, or (2) any taxpayer enters into any transaction with another corporation on such terms as to create an improper loss or net income, the tax commission may include in the entire net income alternative entire net income of the taxpayer the fair profits which, but for such agreement, arrangement or understanding, the taxpayer might have derived from such' transaction.

§ 28. The opening paragraph of section one of chapter seven hundred şeventytwo of the laws of nineteen hundred sixty-six, relating to the imposition of new taxes on general, financial, insurance, transportation corporations and unincorporated businesses in'a city having a population of

million or more, as amended by chapter one thousand fifteen of the laws of nineteen hundred eighty-one, is amended to read as follows:

Notwithstanding any other provision of law to the contrary, any city having a population of one million or more, acting through its local legislative body, is hereby authorized and empowered to adopt and amend local laws imposing for any such city taxes

general

corporations, financial corporations, (insurances] insurance corporations and transportation corporations at the rates provided herein, or if alternative rates are provided, then, in such event, at either of such rates. The terms of such local law or local laws shall be, substantially, follows except

that any such local law may be amended for the purpose of conforming it with similar provisions of articles nine-A nine-B, nine-C, twenty-seven and thirty-two (except section fourteen hundred fifty-six thereof) of the tax law and section eight of chapter one hundred sixty-seven of the laws of nineteen hundred seventy-two as presently in effect or as they may be amended provided, however, that the definition set forth in subsection (c) of section fourteen hundred fifty of the tax law and the deduction set forth in subsection (f) of section fourteen hundred fifty-three of the tax law shall be incorporated in any local law imposing a tax such as is imposed by article thirty-two of the tax law and provided further, that a provision analogous to paragraph one of subsection (b) of section fourteen hundred fifty-five of the tax law,

such paragraph one existed immediately prior to its repeal by section twenty-four of a chapter of the laws of nineteen hundred eightyfive, shall continue to apply to banking corporations organized under the laws of any country other than the United States, and provided further,

however, that in the event that any, local law is adopted imposing a tax such as is imposed by such article thirty-two of the tax law, then

tax such as is or has been imposed by articles nine-B and nine-C of such tax law shall be imposed by such city for any periods for which a tax such is imposed by such article thirty-two is imposed and the rates of tax under any such local law imposing a tax such as is imposed EXPLANATION-Matter in italics is new; matter in brackets [] is old law

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by such article thirty-two shall be, for the basic tax analogous to that fixed by subsection (a) of section fourteen hundred fifty-five of the tax law, no greater than [thirteen and eight hundred twenty-three onethousandths) nine per centum, [except for a savings bank and savings and loan association, greater than twelve and one hundred thirty-four one-thousandths per centum,] for the alternative minimum tax analogous to that fixed under paragraph one of subsection (b) of such section, as such paragraph one existed prior to its repeal by section twenty-four of & chapter of the laws of nineteen hundred eighty-five, no greater than two and six-tenths mills per dollar of issued capital stock apportionable to such city, for the alternative minimum tax analogous to that fixed [by paragraphs two and three of such subsection) under such paragraph

added by section twenty-four of such chapter, no greater than (two and five hundred seventy-four one-thousandths per centum, and no greater than one and eight hundred twenty-four one-thousandths per centum, respectively) one-tenth of a mill for the alternative minimum tax analogous to that fixed by paragraph two of such subsection, no greater than three percent, and for the alternative minimum tax analogous to that fixed by paragraph [four] three of such subsection, no greater than [twenty-five] one hundred twenty-five dollars[, except for à savings bank and savings and loan association, no greater than twenty dollars); and except that the appendix in such local laws may be amended for the purpose of conforming it with the United States internal revenue code or other federal laws relating to taxation as presently in effect or as they may be amended:

§ 29. Subdivision B of section nine of chapter eight hundred eightythree of

the

laws of nineteen hundred seventy-five, relating to authorizing any city having a population of one million or more, imposing a tax upon banking corporations such as is imposed under article thirty-two of the tax law, to increase the rates of such tax and to amend the administrative code of the city of New York, in relation to imposing such tax as authorized, is repealed.

§ 30. Paragraph (a) of subdivision four of section R46-3.0 of the administrative code of the city of New York, as amended by local law ber forty-one of the city of New York for the year nineteen hundred seventy-five, is amended to read as follows:

(a) Corporations subject to tax under part three, part four or part five, or under title QQ of chapter forty-six of the code, any trust company organized under a law of this state all of the stock of which is owned by not less than twenty savings banks organized under law of this state, bank holding companies filing a [consolidated] combined return in accordance with section R46-33.0 and] subdivision (f) of section R46-37.8, and housing companies organized and operating pursuant to the provisions of article two of the private housing finance law, shall not be subject to tax under this part; provided, however, that any corporation, other than a utility corporation subject to the supervision of the state department of public service, which is subject to tax under title QQ, of chapter forty-six of the code as a vendor of utility vices shall be subject to tax under this part, but in computing the tax imposed by this section pursuant to the provisions of clause one of paragraph (a) of subdivision one of section R46-4.0, business income allocated to the city pursuant to paragraph (a) of subdivision three of such section, shall be reduced by the percentage which such corporation's gross operating income subject to tax under the aforementioned title QQ is of its gross operating income.

§ 31. Subdivision (c) of section R46-37.0 of such code, as added by chapter two hundred eighty-eight of the laws of nineteen hundred seventy-eight, is amended to read as follows:

(c) The term "international banking facility" shall mean an international bank ing 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 banking department or as is set forth

in the laws of the United States or regulations of the board of governors of the federal reserve system.

§ 32. Section R46-37. 0 of such code is amended by adding two new subdivisions (d) and (e) to read as follows:

(d) The term "subsidiary" means a corporation or association of which over fifty percent of the number of shares of stock entitling the hold,

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 ac

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counts 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 subpart or part two of this title, 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.

§ 33. Subdivision (a) of section R46-37. 2 of such code, as added by local law number eighty-three of the city of New York for the

year nineteen hundred seventy-two, is amended to read as follows: {a} (a) For the purpose of this subpart, a banking corporation means:

[Every] 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 [in the city);

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

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

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

(5) every federal savings and loan association which is doing a banking business [in the city];

((5)) (6) a production credit association organized under the Federal Farm Credit Act of nineteen hundred thirty-three, which is doing a banking, business [in the city] and all of whose stock held by the federal production credit corporation has been retssediation organized under the

[(6)] (7) authority of the United States which is doing a banking business [in the city);

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

[(8) (9) any corporation (eighty] sixty-five per cent or more of whose voting stock is beneficially) owned or controlled, directly or indirectly, by a corporation or corporations subject to article three-a of the [Banking Law] banking law, or registered under the [Federal Bank Holding Company Act] federal bank holding company act of nineteen hundred fifty-six, as amended, [and which makes a consolidated return under the provisions of subdivision (f) of section R46-37.8] 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 (subject to article three of the Banking Law or by a national banking association or associations] described in any of the foregoing paragraphs of this subdivision, 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

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) of section four of the federal bank holding company act of nineteen hundred fifty-six, as amended.

§ 34. Subdivision (b) of section R46-37.2 of such code, as added by local law number eighty-three of the city of New York for the

year nineteen hundred seventy-two, is amended to read as follows:

(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 (articles] article three, three-B, five, [five-a] five-A, sixt, seven and] or ten of the [Banking Law] bank ing law or any business which

corporation association is authorized by such [articles) 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 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 EXPLANATION-Matter in italics is new; matter in brackets [ ] is old law

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business" as used in this section shall also mean such business any corporation association organized under the authority of the United States or organized under the laws of any other state 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, six or ten of the banking law or any business which & corporation or association is authorized by such article to do.

§ 35. Subdivision (d) of section R46-37.2 of such code, as added by local law number eighty-three of the city of New York for nineteen hundred seventy-two, is amended to read as follows:

(d) Corporations taxable under part two. Notwithstanding the provisions of this subpart, all corporations of classes

heretofore taxable under part two of this title shall continue to be taxable under part two, except: (1) corporations organized under [articles) article five-a (or seven] of the banking law [and]; (2) 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, which make a combined return under the provisions of subdivision (f) of section R46-37.8; and (3) banking corporations [eighty percent or more of whose voting stock is beneficially owned by a corporation 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, and which makes a consolidated return under the provisions of subdivision (f) of section R46-37.8, or by a corporation or corporations subject to article three of the banking law or by a national banking association or associations, provided the corporation whose voting stock is so owned is principally engaged in business which might be lawfully conducted by a corporation subject to article three of the banking law or a national banking association) described in paragraph nine of subdivision (a) of section R46-37.2. Provided, however,

that a corporation described in paragraph three of this subdivision which was subject to the tax imposed by part two of this title for its taxable year ending during nineteen hundred eighty-four may, on or before the due date for Filing its return (determined with regard to extensions) for its taxable year ending during nineteen hundred eightyfive, make a one time election to continue to be taxable under such part two. Such election shall continue to be in effect until revoked by the taxpayer. In no event shall such election or revocation be for a part of a taxable year.

§ 36. Paragraph of subdivision (b) of section R46-37. 3 of such code, as added by local law number eighty-three of the city of New York for the year nineteen hundred seventy-two,

is amended to read as follows: (1) (A)

(A), in the case of a corporation organized under the laws of a country other than the United States, (i) any part of

income from dividends or interest on any kind of stock, securities or indebtedness, but only if such income is treated as effectively connected with the conduct of a trade or business in the United States pursuant to section eight hundred sixty-four of the internal revenue code, (ii) any income exempt from federal taxable income under any treaty obligation of the United States, but only if such income would be treated effectively connected in the absence of such exemption, provided that such treaty obligation does not preclude the taxation of such income by a state, (iii) any income which would be treated as effectively connected if such income were not excluded from gross income pursuant to subsection (a) of section one hundred three of the internal revenue code; (B) in the case of any other corporation, any part of any income from dividends interest on any kind of stock, securities or indebtedness; (C), except that for purposes of subparagraphs (A) and (B) above there shall be excluded any amounts treated as dividends pursuant to section seventy-eight of the Internal Revenue Code and any amounts described in paragraphs eleven and twelve of subdivision (e) of this section:

5 37. The opening paragraph of subdivision (e) of section R46-37.3 of such code, as amended by local law number thirty-seven of the city of New York for the year nineteen hundred eighty-two, is amended to read as follows:

There shall be allowed as a deduction [from] in determining entire net income, to the extent not deductible in

in determining federal taxable income:

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& 38. Paragraph eight of subdivision (e) of section R46-37.3 of such code, as added by local law number forty-three of the city of New York for

the year nineteen hundred eighty-three, is amended and four new paragraphs nine, ten, eleven and twelve are added to read as follows:

(8) upon the disposition of recovery property to which paragraph seven of this subdivision applies, the amount, if any, by which the aggregate of the amounts described in paragraph six of subdivision (b) of this section attributable to such property exceeds the aggregate of the amounts described in paragraph' seven of this subdivision attributable to such property,

(9) any amount of money or other property received from the federal deposit insurance corporation pursuant to subsection (c) of section thirteen of the federal deposit insurance act, as amended, regardless of whether any note or other instrument is issued in exchange therefor,

(10) any amount of money or other property received from 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, regardless of whether any note or other instrument is issued in exchange therefor,

(11) (i) seventeen percent of interest income from subsidiary capital, and

(ii) sixty percent of dividend income, gains and losses from subsidiary capital,

(12) twenty-two and one-half percent of interest income on obligations of New York state, or of any political subdivision thereof, or on obligations of the United States, other than obligations held' for resale in connection with regular trading activities.

§ 39. The opening, paragraph of subdivision (f) of section R46-37.3 of such code, as added by chapter two hundred eighty-eight of the laws of nineteen hundred seventy-eight, is amended to read as follows: [There] Provided the

the taxpayer has not made an election pursuant to paragraph two of subdivision (b) of section R46-37.4 of this title, there shall be allowed as a deduction [from] in determining entire net income, to the extent not deductible in determining federal taxable in

the adjusted eligible net income of an international banking facility determined as follows: 5

40. Subdivisions (8) through (j) of section R46-37. 3 of such code are relettered subdivisions (h) through (k) and a new subdivision (8) is added to read as follows:

(8) Entire net income shall be computed without regard to the reduction in the basis of property that is required by section three hundred sixty-two of the internal revenue code of nineteen hundred fifty-four, as amended, because of any amount of money or other property received from the federal deposit insurance corporation pursuant to subsection (c) of section thirteen of the federal deposit insurance

act, amended, or from 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.

S 41. Such code is amended by adding a new section R46-37.3-A to read as follows:

S R46-37.3-A Computation of alternative entire net income.-(a) Alternative entire net income means entire net income as determined

pursuant to section R46-37.3, except that the deductions described in paragraphs eleven and twelve of subdivision (e) of section R46-37.3 shall not be allowed.

(b) Any election made pursuant to paragraph two of subdivision (b) of section R46-37.4 with respect to the modification provided for in subdivision (f) of section R46-37.3 shall be deemed to have been made for purposes of computing alternative entire net income.

42. Section R46-37.4 of such code, as added by local law number eighty-three of the city of New York for

the year

nineteen hundred seventy-two, is amended to read as follows:

§ R46-37.4 Allocation [of entire net income). -[If the taxpayer's entire net income is derived from business carried both within and without the city, the portion thereof which is derived from business carried on within the city shall be allocated under rules and

regulations prescribed by the finance administrator](a) In general. If a taxpayer's entire net income, alternative entire net income, or taxable assets are derived from business carried on within and without the city, EXPLANATION-Matter in italics is new; matter in brackets [ ] is old law

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