N.Y. Comp. Codes R. & Regs. tit. 20 § 120.6

Current through Register Vol. 46, No. 45, November 2, 2024

Section 120.6 - Credit against separate tax on the ordinary income portion of a lump sum distribution

Tax Law, § 620-A

(a)General.

A resident individual, estate or trust is entitled to a credit under this section against the separate tax imposed by section 603 of the Tax Law on the ordinary income portion (or part thereof) of a lump sum distribution. This credit is allowable with respect to any income tax imposed for the taxable year by another state of the United States, a political subdivision of such state, the District of Columbia, or a province of Canada on such ordinary income portion (or part thereof) of a lump sum distribution which is derived from a business, trade, profession, occupation or from personal services as an employee within such taxing jurisdiction and is subject to tax under section 603 of the Tax Law. (See subdivision [b] of this section for the determination of income tax imposed by another jurisdiction.) However, no credit is allowable under this section if no income tax is actually due to the other jurisdiction with respect to the ordinary income portion (or part thereof) of a lump sum distribution. Further, no credit is allowable if the other jurisdiction provides an exemption of its income tax on the ordinary income portion (or part thereof) of a lump sum distribution to a New York State resident subject to the New York State separate tax on such income.

(b) Determination of income tax imposed by another jurisdiction.

(1) Where the ordinary income portion (or part thereof) of a lump sum distribution is subject to separate income taxation by another state of the United States, a political subdivision of such state, the District of Columbia, or a province of Canada, the amount of separate tax imposed on such income by such jurisdiction (reduced by any applicable credits of such jurisdiction, exclusive of prepayments) is the amount which constitutes the income tax imposed on the ordinary income portion (or part thereof) of a lump sum distribution by such other jurisdiction.

(2) Where such ordinary income portion (or part thereof) of a lump sum distribution is not subject to separate income taxation by such other taxing jurisdiction, but is included as income in determining the income tax imposed by such jurisdiction, the portion of such income tax which constitutes the income tax imposed on the ordinary income portion (or part thereof) of a lump sum distribution is determined by multiplying the entire income tax payable to the other taxing jurisdiction by a fraction, the numerator of which is the ordinary income portion (or part thereof) of the lump sum distribution included in the income subject to tax by such jurisdiction and the denominator of which is all the income subject to such tax by such jurisdiction. See sections 120.1 through 120.5 of this Part for the resident credit allowable against ordinary tax for the balance of the income tax imposed by such other taxing jurisdiction which does not constitute the income tax imposed on the ordinary income portion (or part thereof) of a lump sum distribution.

(c)Method of claiming credit.

(1) If a resident individual, estate or trust claims a credit under this section for income taxes imposed by another jurisdiction (determined in accordance with the provisions of subdivision [b] of this section), a completed New York State credit claim form must be attached to the New York State personal or fiduciary income tax return filed for the taxable year.

(2)

(i) If two or more taxing jurisdictions (as defined in this paragraph) impose income taxes on the same or different amounts of the ordinary income portion (or part thereof) of a lump sum distribution derived from sources within such other jurisdictions, a separate credit claim form must be completed for each jurisdiction for which credit is claimed and attached to the taxpayer's New York State personal or fiduciary income tax return. In order to determine the income tax imposed by another jurisdiction to be reported on the separate credit claim forms, see subdivision (b) of this section.

(ii) The term two or more taxing jurisdictions as used in this section means any combination of states (other than New York State), political subdivisions of different states (other than both a state and one or more of its political subdivisions as provided in subdivision [e] of this section), the District of Columbia, and provinces of Canada.

(3) If both a state (other than New York State) and one or more of the political subdivisions of such state impose income taxes on the same or different amounts of the ordinary income portion (or part thereof) of a lump sum distribution derived from sources within such state and one or more of its political subdivisions, the sum of such income taxes imposed by the state and its political subdivisions (determined in accordance with the applicable provisions of subdivision [b] of this section) must be reported on a single credit claim form. The single credit claim form must be filed with the taxpayer's New York State personal or fiduciary income tax return.

(d) Limitations.

The amount of credit against the separate tax on the ordinary income portion (or part thereof) of a lump sum distribution for income taxes imposed by another jurisdiction on such income is subject to the three limitations provided in paragraphs (1), (2) and (3) of this subdivision. Where credit is claimed against such separate tax for income taxes imposed on the ordinary income portion (or part thereof) of a lump sum distribution by two or more taxing jurisdictions as defined in paragraph (2) of subdivision (b) of this section, these three limitations must be applied separately to each jurisdiction for each credit being claimed. See subdivision (e) of this section for the limitations in cases where such credit is claimed for income taxes imposed by both a state and one or more of its political subdivisions on the ordinary income portion (or part thereof) of a lump sum distribution.

(1) The credit allowable under this section cannot exceed the income tax imposed by another jurisdiction (as determined in accordance with the provisions of subdivision [b] of this section) on the ordinary income portion (or part thereof) of a lump sum distribution. If a taxpayer claims a credit against the separate tax in accordance with the provisions of this section for the income tax or taxes (or any portion thereof) imposed by another jurisdiction on the ordinary income portion (or part thereof) of a lump sum distribution, and it is later determined that the amount of such tax or taxes (or the portion for which the credit was claimed) is more or less than the amount of credit claimed with respect to such tax or taxes on the taxpayer's New York State personal or fiduciary income tax return, the taxpayer (or fiduciary in the case of a fiduciary return) must file an amended New York State return at the address indicated on the form and in the instructions.

(2) The credit allowable under this section cannot exceed the amount obtained by multiplying the separate tax due under section 603 of the Tax Law by a percentage determined by dividing the portion of the ordinary income portion of the lump sum distribution taxable both under section 603 of the Tax Law and by such other jurisdiction (the numerator) by the total amount of the ordinary income portion of the lump sum distribution taxable under such section (the denominator).

(3) The credit allowable under this section cannot reduce the separate tax due under section 603 of the Tax Law to an amount less than would have been due if the part of the ordinary income portion of the lump sum distribution taxable both under section 603 of the Tax Law and by such other jurisdiction were excluded from the computation of the separate tax due under such section.

(e)Limitations where credit is claimed under this section for income taxes paid to both a state and also to one or more of its political subdivisions.

Where both a state and one or more of its political subdivisions impose income taxes on the same or different amounts of a resident taxpayer's ordinary income portion (or part thereof) of a lump sum distribution derived from sources within such state and political subdivision (which income is also subject to the separate tax under section 603 of the Tax Law), the maximum credit allowable is the lowest of the amounts determined after computing the following three limitations:

(1) The credit cannot exceed the total of the income taxes payable by such taxpayer to the other state and the other political subdivision or subdivisions on the ordinary income portion (or part thereof) of a lump sum distribution (determined separately for the other state and its subdivision [s] in accordance with the provisions of paragraph [b][1] and/or [2] of this section and then combined). For notification of a change of income tax payable to the other state or a subdivision thereof, see paragraph (d)(1) of this section.

(2) The credit cannot exceed the amount obtained by multiplying the New York State separate tax payable by the taxpayer on the ordinary income portion (or part thereof) of a lump sum distribution by the percentage determined by dividing the taxpayer's portion (or part thereof) of such income subject to taxation by such other jurisdiction (the numerator) by the taxpayer's portion (or part thereof) of such income subject to the New York State separate tax imposed thereon by section 603 of the Tax Law (the denominator). Where different amounts of the ordinary income portion (or part thereof) are subject to taxation by both the other state and by one or more of its subdivisions, the larger amount of such income subject to tax by either the state or one or more of its subdivisions must be used in the numerator of this computation.

(3) The credit for the total income taxes paid by the taxpayer to both another state and one or more of its political subdivisions on the ordinary income portion (or part thereof) of a lump sum distribution cannot reduce the New York State separate tax payable under section 603 of the Tax Law to an amount less than would have been due under such section if the ordinary income portion (or part thereof) of the lump sum distribution subject to taxation by the other jurisdictions (or where different amounts of such income are subject to taxation by the other jurisdictions, the larger of such amounts) were excluded from the ordinary income portion (or part thereof) of the lump sum distribution reported in accordance with section 603 of the Tax Law.

N.Y. Comp. Codes R. & Regs. Tit. 20 § 120.6