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article, or failing to make any special report required by the tax1 commission, within any reasonable time to be specified by the commission, shall be liable to a penalty of not more than five thousand dollars to be assessed and collected in the manner provided for the assessment and collection of taxes under this article, or in a civil action at the instance of the tax commission; and any officer of any such corporation, association, joint-stock company, unincorporated company, or person or member of a partnership [ making a fraudulent return or statement with intent to defeat or evade the payment of the taxes prescribed by this article, shall be liable to a penalty of not more than one thousand dollars, to be assessed and collected in like manner. Each such tax or fee shall be a lien and binding upon the real and personal property of the corporation, joint-stock company, 'association, unincorporated company, person or partnership" liable to pay the same until the same is paid in full. But the lien of each such tax or additional tax shall be subject to the lien of any mortgage indebtedness existing against real property previous to the time when the tax or additional tax is due and payable and where such mortgage indebtedness has been incurred in good faith and was not given, directly or indirectly, to any officer or stockholder of the corporation owning such real property, whether as a purchase money mortgage or otherwise. Where title to real property passes from an individual, or from a corporation owing no franchise tax or additional tax, to another corporation which is in default for such tax or additional tax, the lien herein provided shall not be enforceable except as to any equity after the prior mortgage encumbrance.

§ 2. Section two hundred and nineteen-c of such chapter as § 219c last amended by chapter five hundred and seven of the laws of amended. nineteen hundred and twenty-two, is hereby amended to read as follows:

§ 219-c. When tax payable. The tax hereby imposed shall be paid to the state tax commission on or before the first day of January of each year, or within thirty days after notice of the tax has been given as provided in section two hundred and nineteen-b of this chapter if such notice is given subsequent to the first day of December of the year for which such tax is imposed. If such tax be not so paid, or in the case of additional taxes, if not paid within thirty days after notice of such additional tax has been given as provided in section two hundred and nineteen-d of this chapter and such notice of additional tax is given subsequent to the first day of December of the year for which such additional tax is imposed, the corporation liable to such tax shall pay to the state tax commission, in addition to the amount of such tax, or

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5 Word or " omitted.

66

6 Words unincorporated company, person or partnership," new.

7 Remainder of section new.

8 As added by L. 1917, ch. 726. Previously amended by L. 1918, ch. 271; L. 1919, ch. 628; L. 1920, ch. 640; L. 1921, ch. 443.

In effect
July 1,

1925.

additional tax, ten per centum of such amount, plus one per centum for each month the tax or additional tax remains unpaid, but the state tax commission upon submission to it of satisfactory proof that the failure to pay such taxes, or additional taxes, within the time prescribed in this article, was not willful or evasive, may modify the exaction to not less than one per centum for each month following the due date of the tax. Each such tax or additional tax shall be a lien' and binding upon the real and personal property of the corporation liable to pay the same until the same is paid in full. 10But the lien of each such tax or additional tax shall be subject to the lien of any mortgage indebtedness existing against real property previous to the time when the tax or additional tax is due and payable and where such mortgage indebtedness has been incurred in good faith and was not given, directly or indirectly, to any officer or stockholder of the corporation owning such real property, whether as a purchase money mortgage or otherwise. Where title to real property passes from an individual, or from a corporation owing no franchise tax or additional tax, to another corporation which is in default for such tax or additional tax, the lien herein provided shall not be enforceable except as to any equity after the prior mortgage encumbrance.

§ 3. This act shall take effect July first, nineteen hundred and twenty-five.

L. 1909, ch. 62, § 211, subd. 9 amended.

CHAPTER 322

AN ACT to amend the tax law, in relation to consolidated reports of certain

corporations.

Became a law April 2, 1925, with the approval of the Governor.

three-fifths being present.

Passed,

The People of the State of New York, represented in Senate and Assembly. do enact as follows:

Section 1. Subdivision nine of section two hundred and eleven of chapter sixty-two of the laws of nineteen hundred and nine, entitled "An act in relation to taxation, constituting chapter sixty of the consolidated laws," such section having been added by chapter seven hundred and twenty-six of the laws of nineteen hundred and seventeen, and such subdivision having been last amended by chapter five hundred and seven of the laws of nineteen hundred and twenty-two,1 is hereby amended to read as follows: 9. Any corporation liable to report under this article and2 ownports of ing or controlling, either directly or indirectly, substantially all of by certain the capital stock of another corporation, or of other corporations,3 may be required to make a consolidated report showing the combined net income, such assets of the corporation as are required for the purposes of this article, and such other information as

Consolidated re

net income

corpora

tions.

Word "upon " omitted.

10 Remainder of section new.

1 Previously amended by L. 1918, ch. 417; L. 1919, ch. 628; L. 1920, ch. 640.
2 Words "liable to report under this article and," new.
Words "liable to report under this article," omitted.

the tax commission may require, but excluding intercorporate stockholdings and intercorporate accounts. Any corporation liable to report under this article and owned or controlled, either directly or indirectly, by another corporation may be required to make a report consolidated with the owning company, showing the combined net income, such assets of the corporation as are required for the purposes of this article, and such other information as the tax commission may require, but excluding intercorporate stockholdings and intercorporate accounts. In case it shall appear to the tax commission that any arrangement exists in such a manner as to improperly reflect the business done, the segregable assets or the entire net income earned from business. done in this state. the tax commission is authorized and empowered, in such manner as it may determine, to equitably adjust the tax and to eliminate any assets included in the segregations thereof, provided only that any income directly traceable thereto be also excluded from entire net income.

The tax commission may permit or require the filing of a combined report where substantially all the capital stock of two or more corporations liable to reports under this article is owned or controlled by the same interests. The tax commission may impose the tax provided by this article as though the combined entire net income and segregated assets were those of one corporation, or may, in such other manner as it shall determine, equitably adjust the tax.

Where any corporation liable to taxation under this article conducts the business, whether under agreement or otherwise in such manner as either directly or indirectly to benefit the members or stockholders of the corporation, or any of them, or any person or persons, directly or indirectly interested in such business by selling its products or the goods or commodities in which it deals at less than a fair price which might be obtained therefor, or where such a corporation, a substantial portion of whose capital stock is owned either directly or indirectly by another corporation, acquires and disposes of the products of the corporation so owning the substantial portion of its capital stock in such manner as to create a loss or improper net income, the tax commission may require such facts as it deems necessary for the proper computation provided by this article, and may for the purpose of the act determine the amount which shall be deemed to be the entire net income of the business of such corporation for the calendar or fiscal year, and in determining such entire net income the tax commission shall have regard to the fair profits which, but for any agreement, arrangement or understanding, might be or could have been obtained from dealing in such products, goods or commodities.

'If it shall appear to the tax commission that the segregation of assets shown by the report does not properly reflect the corporate

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L. 1909, 62,

ch. § 211, subd. 1 amended.

Reports to

tax commission.

8 214 amended.

activity or business done, or the income earned from corporate activity or from business done in this state because of the character of the corporation's business and the character and location of its assets, the tax commission is authorized and empowered to equitably adjust the tax upon the basis of the corporate activity or the business done within and without the state rather than upon capital or assets employed.

§ 2. This act shall take effect immediately.

CHAPTER 323

AN ACT to amend the tax law. in relation to reports of and franchise taxes on certain business corporations.

Became a law April 2, 1925, with the approval of the Governor.

three-fifths being present.

Passed,

The People of the State of New York, represented in Senate and Assembly do enact as follows:

Section 1. Subdivision one of section two hundred and eleven of chapter sixty-two of the laws of nineteen hundred and nine. entitled "An act in relation to taxation, constituting chapter sixty of the consolidated laws," such section having been added by chapter seven hundred and twenty-six of the laws of nineteen hundred and seventeen, and such subdivision having been last amended by chapter six hundred and forty of the laws of nineteen hundred and twenty,1 is hereby amended to read as follows:

1. The name and location of the principal place of business of such corporation, the state under the laws of which organized. and the date thereof; the amount of its issued capital stock and the kind of business transacted. Any corporation not organized under the laws of any state within the United States shall state the facts in relation to its entire net income wherever earned and as though organized under the laws of this state, and instead of stating its income as returned to the United States treasury department. If any corporation is not subject to a franchise tax based on net income, and is incorporated and issues capital stock, or increase its issued capital stock, after the thirtieth day of June and prior to the first day of November in any year, it shall forthwith report to the tax commission the amount of such increase or issue and shall be taxable thereon as though increased or issued prior to the first day of July and as provided by section two hundred and fourteen of the tax law.

*

§ 2. Section two hundred and fourteen of such chapter, as added by chapter seven hundred and twenty-six of the laws of nineteen hundred and seventeen and last amended by chapter five hundred and seven of the laws of nineteen hundred and twenty-two,3 is hereby amended to read as follows:

* So in original. [Should be "increases."]

1 Previously amended by L. 1918, ch. 417; L. 1919, ch. 628.

2 Following sentence new.

3 Previously amended by L. 1918, chs. 276, 417; L. 1919, ch. 628; L. 1920, ch. 640; L. 1921, ch. 705.

E

§ 214. Computation of tax. If the entire business of the corporation be transacted within the state, the tax imposed by this article, if imposed upon the entire net income, shall be based upon the entire net income of such corporation for such fiscal or calendar year as defined in section two hundred and eight of this chapter, subject, however, to any correction thereof for fraud, evasion or error, as ascertained by the state tax commission. If the entire business of such corporation be not transacted within the state, the tax imposed by this article shall be based upon a proportion of such entire net income, to be determined in accordance with the following rules: The proportion of the entire net income of the corporation upon which the tax under this article shall be based, shall be such portion of the entire net income as the aggregate of 1. The average monthly value of the real property and tangible personal property within the state.

2. The average monthly value of bills and accounts receivable arising from (a) personal property sold by the corporation from merchandise manufactured by it within the state; (b) personal property owned by the corporation and not manufactured by it within this state but sold by it or its agents and located within the state at the time of the receipt of the order; (c) the purchase or sale of, or trading in, goods, wares or merchandise not located at any place at which the corporation conducted a permanent or continuous business without the state, and where the bills and accounts receivable arose from orders received or accepted by any officer or agent, or at any place of business, in this state; and (d) services performed by any officer, agent or representative of the corporation connected with, sent from, or reporting, either directly or indirectly, to any officer located in this state or at any office located, owned, rented or occupied in this state.

3. The proportion of the average value of the stocks of other corporations owned by the corporation, allocated to the state as provided by this section, bears to the aggregate of

4. The average monthly value of all the real property and tangible personal property of the corporation, wherever located. 5. The average total monthly value for the fiscal or calendar year of bills and accounts receivable arising from (a) personal property sold by the corporation from merchandise manufactured by it within and without this state; and (b) the purchase, or sale of, or trading in, personal property, or from services performed by the corporation, its officers or agents, excluding those arising in any way from advances or loans.

6. The average total value of stocks of other corporations owned by the corporation.

7. In case any report is made as provided by subdivision nine of section two hundred and eleven of the tax law, the tax commission may assess the tax against either of the corporations whose assets or net income are involved in the report and upon the basis of the combined entire net income and the combined segregated assets of the corporation and upon such other information as it may possess, or may adjust the tax in such other manner as it shall determine to be equitable.

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