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NEW YORK TAX
TAX

Last update: 2011-11-13


  • Article 1. Short Title; Definitions; Miscellaneous 1 - 35*2
  • Article 8. Department of Taxation and Finance; Commissioner of Taxation and Finance 170 - 179
  • Article 9. Corporation Tax 180 - 207-B
  • Article 9-A. Franchise Tax on Business Corporations 208 - 219-A
  • Article 11. Tax on Mortgages 250 - 267
  • Article 12. Tax on Transfers of Stock and other Corporate Certificates 270 - 281-A
  • Article 12-A. Tax on Gasoline and Similar Motor Fuel 282 - 289-F
  • Article 13. Tax on Unrelated Business Income 290 - 296
  • Article 13-A. Tax on Petroleum Businesses 300 - 315
  • Article 14. Laws Repealed; When to Take Effect 320 - 321
  • Article 18. Taxes on Alcoholic Beverages 420 - 445
  • Article 19. Boxing and Wrestling Exhibitions Tax 451 - 456
  • Article 20. Tax on Cigarettes and Tobacco Products 470 - 482-A
  • Article 20-A. Cigarette Marketing Standards 483 - 489
  • Article 21. Highway Use Tax 501 - 515
  • Article 21-A. Tax on Fuel Use 521 - 528
  • Article 22. Personal Income Tax
    • Part 1. General 601 - 607
    • Part 2. Residents 611 - 630-B
    • Part 3. Nonresidents and Part-year Residents 631 - 639
    • Part 4. Returns and Payment of Tax 651 - 663
    • Part 5. Withholding of Tax 671 - 678
    • Part 6. Procedure and Administration 681 - 699
  • Article 23. Metropolitan Commuter Transportation Mobility Tax 800 - 806
  • Article 25. Reciprocal Enforcement of Tax Liabilities 901 - 903
  • Article 26. Estate Tax
    • Part 1. Computation of Tax 951 - 961
    • Part 2. Returns and Payment of Tax 971 - 980
    • Part 3. Liens, Discharges and Surrogate's Court 981 - 983
    • Part 4. Procedure and Administration 990 - 999
  • Article 26-B. Generation-skipping Transfer Tax 1020 - 1025
  • Article 27. Corporate Tax Procedure and Administration 1080 - 1097
  • Article 28. Sales and Compensating Use Taxes
    • Part 1. Definitions 1101 - 1103
    • Part 2. Imposition of Taxes 1104 - 1112
    • Part 3. Exemptions 1115 - 1123
    • Part 4. Administrative Provisions 1131 - 1148
    • Part 5. Fee on Paging Devices 1150
  • Article 28-A. Special Tax on Passenger Car Rentals 1160 - 1167
  • Article 28-B. Simplified Sales and Use Tax Administration 1170 - 1178
  • Article 29. Taxes Authorized for Cities, Counties and School Districts
    • Part 1. Authority to Impose Taxes
      • SubPart A. Taxes Administered by Cities, Counties and School Districts 1201 - 1206
      • SubPart B. Taxes Administered by State Tax Commission 1210 - 1218
    • Part 2. Limitations on Authority and Exemptions
      • SubPart A. General 1220 - 1224
      • SubPart B. Taxes Administered by Cities, Counties and School Districts 1230 - 1231
      • SubPart C. Taxes Administered by State Tax Commission 1235
    • Part 3. Administrative Provisions
      • SubPart A. Taxes Administered by Cities, Counties and School Districts 1240 - 1243
      • SubPart B. Taxes Administered by Tax Commission 1250 - 1254
      • SubPart C. Miscellaneous 1256 - 1257
    • Part 4. Disposition of Revenues 1260 - 1264
  • Article 29-A. Tax on Medallion Taxicab Trips in the Metropolitan Commuter Transportation District 1280 - 1290
  • Article 30. City Personal Income Tax 1300 - 1313
  • Article 30-A. City Income Tax Surcharge 1320 - 1333
  • Article 30-B. City Earnings Tax on Nonresidents 1340 - 1343
  • Article 31. Real Estate Transfer Tax 1400 - 1421
  • Article 31-A. Tax on Real Property Transfers for Transportation Assistance 1424 - 1436
  • Article 31-A-1. Tax on Real Estate Transfers in the Town of Red Hook. Repeal Date: 12/31/2026. 1438-A - 1438-O
  • Article 31-A-2. Tax on Real Estate Transfers in the County of Columbia. Repeal Date: 12/31/2013. 1439-A - 1439-O
  • Article 31A2*2. Tax on Real Estate Transfers in the Town of Chatham. Repeal Date: 12/31/2027. 1439-A*2 - 1439-O*2
  • Article 31A2*3. Tax on Real Estate Transfers in the Town of Fishkill. Repeal Date: 12/31/2027. 1439-A*3 - 1439-O*3
  • Article 31-A-3. Tax on Real Estate Transfers in the Town of Northeast. Repeal Date: 12/31/2028. 1439-AA - 1439-OO
  • Article 31-B. Tax on Real Estate Transfers in the Town of Brookhaven. Repeal Date: 12/31/2025. 1440 - 1448-F
  • Article 31-B-1. Tax on Real Estate Transfers in the County of Essex 1448-G - 1448-U
  • Article 31-C. Tax on Real Estate Transfers in the County of Broome 1449-F - 1449-T
  • Article 31-D. Tax on Real Estate Transfers in Towns in the Peconic Bay Region. Repeal Date: 12/31/2030. 1449-AA - 1449-OO
  • Article 31-E. Tax on Real Estate Transfers in the County of Nassau 1449-AAA - 1449-OOO
  • Article 31-F. Tax on Real Estate Transfers in the Town of Warwick. Repeal Date: 12/31/2025. 1449-AAAA - 1449-OOOO
  • Article 31-G. Tax on Real Estate Transfers in the County of Tompkins 1449-AAAAA - 1449-OOOOO
  • Article 32. Franchise Tax on Banking Corporations 1450 - 1468
  • Article 33. Franchise Taxes on Insurance Corporations 1500 - 1520
  • Article 33-A. Tax on Independently Procured Insurance 1550 - 1557
  • Article 33-B. Tax on Real Estate Tranfers in Towns 1560 - 1573
  • Article 34. New York State Lottery for Education 1600 - 1620
  • Article 36. Compliance and Enforcement Initiatives 1700 - 1703
  • Article 37. Crimes and other Offenses, Seizures and Forfeitures
    • Part 1. Definitions 1800
    • Part 2. Tax Fraud Acts and Penalties 1801 - 1809
    • Part 3. Other Taxes 1811 - 1821
    • Part 4. Miscellaneous Crimes 1825 - 1833
    • Part 5. Procedural Provisions 1838 - 1839
    • Part 6. Seizures and Forfeitures 1845 - 1848
  • Article 40. Division of Tax Appeals 2000 - 2026
  • Article 41. Taxpayers' Bill of Rights
    • Part 1. Taxpayers' Rights 3000 - 3013
    • Part 2. Liens and Levies 3016 - 3022
    • Part 3. Proceedings by Taxpayers 3030 - 3038

Article 1
Short Title; Definitions; Miscellaneous

Section 1. Short title.

This chapter shall be known as the "Tax Law."

Section 2. Definitions.

1. Unless otherwise expressly stated or unless the context or subject matter otherwise requires, "tax department" or "department", as used in this chapter, means the department of taxation and finance, "commissioner" means the commissioner of taxation and finance or his delegate, and "tax commission" or "commission", in all matters pertaining to the administration of the division of tax appeals, means the tax appeals tribunal and in all other matters means the commissioner of taxation and finance.

2. "Comptroller" as used in this chapter means the state comptroller.

3. "County treasurer" includes any officer performing the duties devolving upon such office under whatever name.

4. "Infant" or "minor" as used in this chapter means a person who has not attained the age of eighteen years.

5. The term "limited liability company" means a domestic limited liability company or a foreign limited liability company, as defined in section one hundred two of the limited liability company law, a limited liability investment company formed pursuant to section five hundred seven of the banking law, or a limited liability trust company formed pursuant to section one hundred two-a of the banking law.

6. "Partnership and partner," unless the context requires otherwise, shall include, but shall not be limited to, a limited liability company and a member thereof, respectively.

7. "REIT" means a real estate investment trust as defined in section eight hundred fifty-six of the internal revenue code.

8. "RIC" means a regulated investment company as defined in section eight hundred fifty-one of the internal revenue code.

9. "Captive REIT" means a REIT that is not regularly traded on an established securities market, and ( more than fifty percent of the voting stock of which is owned or controlled, directly or indirectly, by a single entity treated as an association taxable as a corporation under the Internal Revenue Code that is not exempt from federal income tax and is not a REIT. Any voting stock in a REIT that is held in a segregated asset account of a life insurance corporation (as described in section 817 of the internal revenue code) shall not be taken into account for purposes of determining whether a REIT is a captive REIT. None of the following entities shall be considered an association taxable as a corporation for purposes of this subdivision:

(a) any listed Australian property trust (meaning an Australian unit trust registered as a "managed investment scheme" under the Australian Corporations Act in which the principal class of units is listed on a recognized stock exchange in Australia and is regularly traded on an established securities market), or an entity organized as a trust, provided that a listed Australian property trust owns or controls, directly or indirectly, seventy-five percent or more of the voting power or value of the beneficial interests or shares of such trust; or

(b) any qualified foreign entity, meaning a corporation, trust, association or partnership organized outside the laws of the United States and which satisfies the following criteria:

(i) at least seventy-five percent of the entity's total asset value at the close of its taxable year is represented by real estate assets (as defined at subparagraph (B) of paragraph (5) of subsection (c) of section eight hundred fifty-six of the internal revenue code, thereby including shares or certificates of beneficial interest in any real estate investment trust), cash and cash equivalents, and United States Government securities;

(ii) the entity is not subject to tax on amounts distributed to its beneficial owners, or is exempt from entity-level taxation;

(iii) the entity distributes at least eight-five percent of its taxable income (as computed in the jurisdiction in which it is organized) to the holders of its shares or certificates of beneficial interest on an annual basis;

(iv) not more than ten percent of the voting power or value in such entity is held directly or indirectly or constructively by a single entity or individual, or the shares or beneficial interests of such entity are regularly traded on an established securities market; and

(v) the entity is organized in a country which has a tax treaty with the United States.

10. "Captive RIC" means a RIC (a) that is not regularly traded on an established securities market, and (b) more than fifty percent of the voting stock of which is owned or controlled, directly or indirectly, by a single corporation that is not exempt from federal income tax and is not a RIC. Any voting stock in a RIC that is held in a segregated asset account of a life insurance corporation (as described in section 817 of the internal revenue code) shall not be taken into account for purposes of determining whether a RIC is a captive RIC.

11. The term "overcapitalized captive insurance company" means an entity that is treated as an association taxable as a corporation under the internal revenue code (a) more than fifty percent of the voting stock of which is owned or controlled, directly or indirectly, by a single entity that is treated as an association taxable as a corporation under the internal revenue code and not exempt from federal income tax; (b) that is licensed as a captive insurance company under the laws of this state or another jurisdiction; (c) whose business includes providing, directly and indirectly, insurance or reinsurance covering the risks of its parent and/or members of its affiliated group; and (d) fifty percent or less of whose gross receipts for the taxable year consist of premiums. For purposes of this subdivision, "affiliated group" has the same meaning as that term is given in section 1504 of the internal revenue code, except that the term "common parent corporation" in that section is deemed to mean any person, as defined in section 7701 of the internal revenue code; references to "at least eighty percent" in section 1504 of the internal revenue code are to be read as "fifty percent or more;" section 1504 of the internal revenue code is to be read without regard to the exclusions provided for in subsection (b) of that section; "premiums" has the same meaning as that term is given in paragraph one of subdivision (c) of section fifteen hundred ten of this chapter, except that it includes consideration for annuity contracts and excludes any part of the consideration for insurance, reinsurance or annuity contracts that do not provide bona fide insurance, reinsurance or annuity benefits; and "gross receipts" includes the amounts included in gross receipts for purposes of section 501(c) (15) of the internal revenue code, except that those amounts also include all premiums as defined in this subdivision.

Section 3. Exemption from certain taxes granted to certain corporations engaged in the operation of vessels in foreign commerce.

All corporations incorporated under the laws of the state of New York, exclusively engaged in the operation of vessels in foreign commerce, are exempted from all taxation in this state, for state and local purposes, upon their capital stock, franchises and earnings.

Section 4. Exemption from certain excise and sales taxes granted to the United Nations.

Excise and sales taxes imposed by the state upon the sale of tangible personal property shall not be exacted or required to be paid by the United Nations upon and with respect to any sale of tangible personal property hereafter made, provided the property is acquired for the official use of the United Nations; and the provisions of any law now in force or hereafter enacted imposing any such tax shall not apply to sales of tangible personal property to the United Nations. The state tax commission shall make such reasonable rules and regulations as may be necessary to give full force and effect to the provisions of this section.

Section 5. Obtaining and furnishing taxpayer identification information.

1. Definitions. For purposes of this section, the following terms shall mean:

(a) "License" shall include the whole or part of any covered agency permit, certificate, approval, registration, charter or similar form of permission to engage in a profession, trade, business or occupation and any notification required to be made to any covered agency that a profession, trade, business or occupation is being engaged in or is expected to be commenced. However, such term shall not include any original charter or certificate of incorporation granted by any covered agency.

(b) "Person" shall mean an individual, partnership, limited liability company, society, association, joint stock company, corporation, estate, receiver, trustee, assignee, referee, or any other person acting in a fiduciary or representative capacity, whether appointed by a court or otherwise, or any combination of the foregoing. However, such term shall not include any public corporation, corporation formed other than for profit or unincorporated not-for-profit entity, except such term shall include an education corporation of the type dealt with in section two hundred twenty-one of the education law, an education corporation subject to article one hundred one of the education law and a cooperative corporation.

* (c) "State agency" shall mean the state of New York, any department, board, bureau, commission, division, office, council or agency thereof, a public authority or a public benefit corporation.

* NB Effective until enactment by New Jersey

* (c) " Covered agency" shall mean the state of New York, any county of the state of New York, any department, board, bureau, commission, division, office, council or agency of the state or any such county, a public authority, a public benefit corporation, the port authority of New York and New Jersey or the waterfront commission of New York harbor. When a county is wholly included within a city, then the term "county" shall be read to include the city.

* NB Effective upon enactment by New Jersey

2. Requiring information. Notwithstanding any other provision of law, every covered agency shall, as part of the procedure for granting, renewing, amending, supplementing or restating the license of any person or at the time the covered agency contracts to purchase or purchases goods or services or leases real or personal property from any person, require that each such person provide to the covered agency such person's federal social security account number or federal employer identification number, or both such numbers when such person has both such numbers, or, where such person does not have such number or numbers, the reason or reasons why such person does not have such number or numbers. Such numbers or reasons shall be obtained by such covered agency as part of the administration of the taxes administered by the commissioner for the purpose of establishing the identification of persons affected by such taxes.

3. Furnishing information to commissioner. (a) Notwithstanding any other provision of law, a covered agency shall, upon request of the commissioner, furnish to the commissioner the following information with respect to each person covered by subdivision two of this section:

(1) business name or the name under which the applicant for a license or licensee will be licensed or is licensed;

(2) business address or whatever type of address the covered agency requires the applicant for a license or the licensee to furnish to it; and

(3) federal social security account number or federal employer identification number, or both such numbers where such person has both such numbers, or the reason or reasons, furnished by such person, why such person does not have such number or numbers.

(b) The reports required under paragraph (a) of this subdivision shall be submitted on a compatible magnetic tape file or in some other form which is mutually acceptable to the covered agency and the commissioner.

4. Report not open to public inspection. Notwithstanding article six of the public officers law or any other provision of law, the report to be furnished by the covered agency to the commissioner pursuant to subdivision three of this section shall not be open to the public for inspection.

Section 5-A. Certification of registration to collect sales and compensating use taxes by certain contractors, affiliates and subcontractors.

1. For purposes of this section, the following terms shall have the specified meanings:

(a) "Affiliate" means a person which directly, indirectly or constructively

(1) controls another person;

(2) is controlled by another person; or

(3) is, along with another person, under the control of a common parent.

"Control" means possession of the power to direct, or cause the direction of, the management and policies of another person.

(b) "Commodities" means commodities as defined in article eleven of the state finance law.

(c) (1) "Contract" means an agreement between a contractor and a covered agency for the purchase by the covered agency, pursuant to article eleven of the state finance law, of commodities or services having a value in excess of one hundred thousand dollars.

The term "contract" shall also include a centralized contract, as defined in article eleven of the state finance law, with a value in excess of one hundred thousand dollars.

(2) The term "contract" shall not include:

(A) a purchase by a covered agency of commodities or services with a value in excess of one hundred thousand dollars based upon a formal mini-bid solicitation pursuant to a centralized contract;

(B) a grant or an intergovernmental agreement; or

(C) a purchase of commodities or services from a "preferred source," as such term is defined in article eleven of the state finance law.

(3) Multiple purchases of commodities or services by a covered agency from the same contractor during a state fiscal year shall not be aggregated for purposes of determining whether the greater than one hundred thousand dollar threshold described in this subdivision has been met.

(d) "Contractor" means a person awarded a contract.

(e) "Covered agency" means a "state agency" for purposes of article eleven of the state finance law, the legislature, the judiciary, or a public authority or public benefit corporation at least one of whose members is appointed by the governor.

(f) "Department" means the department of taxation and finance.

(g) "Person" means an individual, partnership, limited liability company, society, association, joint stock company, or corporation; provided, however, that a "person" shall not include a "public corporation" or an "education corporation," as such terms are defined in section sixty-six of the general construction law, a not-for-profit corporation whose contracts are subject to approval in accordance with article eleven-B of the state finance law, a board of cooperative educational services created pursuant to article forty of the education law, or a soil and water conservation district created pursuant to section five of the soil and water conservation districts law.

(h) "Sales and compensating use taxes" means state and local sales and compensating use taxes imposed by article twenty-eight and pursuant to the authority of article twenty-nine of this chapter, which are administered by the commissioner.

(i) "Sales tax quarter" means a quarterly period ending on the last day of February, May, August or November.

(j) "Services" means services as defined in article eleven of the state finance law.

(k) "Subcontractor" means a person engaged by a contractor or another subcontractor to perform a portion of the contractor's obligations under a contract.

(l) "State" means the state of New York.

(m) "Taxable services" means services, the receipts from the sale of which are taxable by article twenty-eight or article twenty-nine of this chapter.

(n) The terms "receipts," "sale," "tangible personal property" and "vendor" have the meanings given in article twenty-eight of this chapter.

2. (a) Notwithstanding any provision of law to the contrary, before a contract may take effect, the contractor must comply with the requirements of subparagraphs one and two of this paragraph.

(1) The contractor must file a written certification with the department, made under penalty of perjury, stating that:

(A) if the contractor made sales delivered by any means to locations within the state of tangible personal property or taxable services having a value in excess of three hundred thousand dollars during the immediately preceding consecutive four sales tax quarters, the contractor is registered for sales and compensating use tax purposes with the department under sections eleven hundred thirty-four and twelve hundred fifty-three of this chapter. If the contractor did not make sales delivered by any means to locations within the state of tangible personal property or taxable services having a value in excess of three hundred thousand dollars during such four sales tax quarters, then the contractor shall so certify;

(B) if any affiliate of the contractor made sales delivered by any means to locations within the state of tangible personal property or taxable services having a value in excess of three hundred thousand dollars during the immediately preceding consecutive four sales tax quarters, to the best of the contractor's knowledge, each such affiliate is registered for sales and compensating use tax purposes with the department under sections eleven hundred thirty-four and twelve hundred fifty-three of this chapter. If the contractor does not have any affiliates, or does not have any affiliates which made sales delivered by any means to locations within the state of tangible personal property or taxable services having a value in excess of three hundred thousand dollars during such four sales tax quarters, then the contractor shall so certify; and

(C) if any subcontractor made sales delivered by any means to locations within the state of tangible personal property or taxable services having a value in excess of three hundred thousand dollars during the immediately preceding consecutive four sales tax quarters, to the best of the contractor's knowledge, each such subcontractor is registered for sales and compensating use tax purposes with the department under sections eleven hundred thirty-four and twelve hundred fifty-three of this chapter. If the contractor does not have any subcontractors, or there are no subcontractors which made sales delivered by any means to locations within the state of tangible personal property or taxable services having a value in excess of three hundred thousand dollars during such four sales tax quarters, then the contractor shall so certify.

(D) The certification required by this subparagraph shall include such additional information as the department deems necessary for the proper administration of this section.

(E) The certification required by this subparagraph need only be filed with the department once and, once filed, shall be deemed to satisfy the requirements of this subparagraph for purposes of any subsequent contract to which the contractor is a party; provided, however, that if the contractor, or an affiliate or subcontractor, is not certified as registered with the department for sales and compensating use tax purposes on the contractor's original certification, and such contractor, affiliate or subcontractor makes sales delivered by any means to locations within the state of tangible personal property or taxable services having a value in excess of three hundred thousand dollars during any consecutive four sales tax quarters which follow the sales tax quarter in which the contractor's original certification was made, then the contractor shall, as soon as possible after such occurrence, file an amended written certification with the department, made under penalty of perjury, indicating that such contractor, affiliate or subcontractor, as applicable, is registered with the department for sales and compensating use tax purposes.

(2) The contractor shall also provide the procuring covered agency with a written certification, made under penalty of perjury, stating that:

(A) the contractor has filed the certification prescribed by this section with the department, and that such certification is correct and complete, or

(B) such certification is not required to be filed with the department, and explaining the reasons for such determination.

(C) the certification required by this subparagraph shall be included in the procurement record (as such term is defined in article eleven of the state finance law), or similar documentation if the state comptroller is not required by law to approve the contract.

(D) any question as to the accuracy of the contractor certification described in clause (B) of this subparagraph shall be resolved by the contracting covered agency, in consultation, as necessary, with the state comptroller and the department.

(b) A contractor, affiliate of the contractor, or subcontractor which registers for sales and compensating use tax purposes under sections eleven hundred thirty-four and twelve hundred fifty-three of this chapter in order to comply with the provisions of this subdivision shall be a vendor and shall comply with and be subject to the provisions of articles twenty-eight and twenty-nine of this chapter.

(c) The certification requirements prescribed by this subdivision in order for a contract to take effect shall be in addition to any other requirements prescribed by law relating to the formation of contracts to which a covered agency is a party.

3. (a) If a contract has taken effect, and the terms of such contract provide that it may be renewed upon expiration of an initial or subsequent term, then the contractor shall, no later than the day prior to the commencement date of the applicable renewal term, certify to the contracting covered agency in writing, and under penalty of perjury, that:

(1) the contractor has filed the certification prescribed by this section with the department, and that such certification is correct and complete, or

(2) that such certification is not required to be filed with the department, and explains the reasons for such determination.

(3) Any question as to the accuracy of the contractor certification described in subparagraph two of this paragraph shall be resolved by the contracting covered agency, in consultation, as necessary, with the state comptroller and the department.

(b) The certification required by paragraph (a) of this subdivision shall be made a part of the procurement record (as such term is defined in article eleven of the state finance law), or similar documentation if the state comptroller is not required by law to approve the contract.

(c) If the contractor fails to make the certification required by paragraph (a) of this subdivision, or if, during the term of the contract, the department or the covered agency discovers that such certification is false, then such failure or false certification shall be a material breach of the contract, and the contract shall be subject to termination if the covered agency determines that such action is in the best interests of the state.

(d) A contractor, affiliate of the contractor, or subcontractor which registers for sales and compensating use tax purposes under sections eleven hundred thirty-four and twelve hundred fifty-three of this chapter in order to comply with the provisions of paragraph (a) of this subdivision shall be a vendor and shall comply with and be subject to the provisions of articles twenty-eight and twenty-nine of this chapter.

4. The provisions of this section shall not apply to a contract if the procuring covered agency and the state comptroller, or other approving authority if the state comptroller is not required to approve the contract, find in writing that the contract is necessary to address an "emergency," within the meaning of article eleven of the state finance law, or to ensure the public health, safety or welfare. Such written finding shall explain the reasons supporting such determination.

Section 6. Filing of warrants in the department of state.

Wherever under the provisions of this chapter a warrant is required to be filed in the department of state in order to create a lien on personal property such requirement shall be satisfied if there is filed a record of the fact of the issuance of such warrant, including the name of the person on the basis of whose tax liability the warrant is issued, the last known address of such person, and the amount of such tax liability, including penalties and interest. No fee shall be required to be paid for such filing of such warrant or such record. The term "filed" in such provisions shall mean presentation to the department of state, for filing, of such warrant or such record.

Section 7. Inapplicability of certain money judgment enforcement procedures.

--Notwithstanding any provision in article fifty-two of the civil practice law and rules or any other provision of law to the contrary, the procedures in such article for the enforcement of money judgments shall not apply to the tax commission, any officer or employee of the department of taxation and finance, or the comptroller or any officer or employee of the department of audit and control, as a garnishee, with respect to any amount of money to be refunded or credited to a taxpayer pursuant to any tax administered by the tax commission, which is imposed by this chapter or by a law enacted pursuant to the authority of this chapter or article two-E of the general city law.

Section 8. Exemption from taxes granted to REMICs.

An entity that is treated for federal income tax purposes as a real estate mortgage investment conduit, hereinafter referred to as a REMIC, as such term is defined in section 860D of the internal revenue code, shall be exempt from all taxation imposed or authorized under this chapter, upon its capital stock, franchises or income. A REMIC shall not be treated as a corporation, partnership or trust for purposes of this chapter. The assets of a REMIC shall not be included in the calculation of any franchise tax liability under this chapter. This provision does not exempt the holders of regular or residual interests, as defined in section 860G of the internal revenue code, in a REMIC from tax on or measured by such regular or residual interests, or on income from such interests.

Section 9. Electronic funds transfer by certain taxpayers remitting withholding taxes.

(a) Definitions. For the purposes of this section:

(1) The term "commissioner" means the commissioner of taxation and finance.

(2) The term "educational organization" means a higher educational institution which

(A) is authorized by the New York state board of regents to confer degrees, or

(B) offers a range of registered undergraduate and graduate curricula in the liberal arts and sciences, degrees in two or more professional fields and doctoral programs in at least three academic fields, or

(C) is authorized by the New York state board of regents to offer undergraduate curricula below the baccalaureate level which normally lead to the associate degree, as such higher educational institutions are described in subdivisions (k), (l) and (m) of section 50.1 of eight New York codes, rules and regulations.

(3) The term "electronic funds transfer" means any transfer of funds, other than a transaction originated by check, draft, or similar paper instrument, which is initiated through an electronic terminal, telephonic instrument or computer or magnetic tape so as to order, instruct or authorize a financial institution to debit or credit an account.

(4) The term "health care provider" means any organization described in article twenty-eight or thirty-six of the public health law, or in article thirty-one of the mental hygiene law.

(5) The term "payment of tax" means the amount of tax that is actually remitted upon the filing of a withholding tax return, or is actually remitted for the purposes of obtaining an extension to file such a return.

(6) The term "reconciliation of withholding" means the quarterly combined withholding, wage reporting and unemployment insurance return required to be filed for the last calendar quarter of each year, as prescribed by paragraph four of subsection (a) of section six hundred seventy-four of this chapter.

(b) General rules. (1) Subject to the requirements contained in subdivisions (c) and (d) of this section, the commissioner shall require by regulation that any payment of tax made by a taxpayer who is required, for either of the semi-annual periods ending June thirtieth or December thirty-first, to deduct and withhold an aggregate of thirty-five thousand dollars or more of withholding taxes pursuant to part V of article twenty-two of this chapter, or pursuant to an equivalent provision enacted under the authority of article thirty, thirty-A or thirty-B of this chapter, or article two-E of the general city law, shall be made, on or before the date prescribed by law, by electronic funds transfer to a bank, banking house or trust company designated by the commissioner. The commissioner shall designate only such banks, banking houses or trust companies as are or shall be designated by the comptroller as depositories pursuant to section one hundred seventy-one-a of this chapter, as added by chapter sixty-nine of the laws of nineteen hundred seventy-eight. Notwithstanding any provision of law to the contrary, any such payment shall be deemed to be made on the date the payment is received by the designated depository of the department; provided, however, that at the election of a taxpayer subject to the provisions of this subdivision, mailing by the taxpayer of the applicable withholding tax return and a certified check for the amount of the tax liability on or before the second business day prior to the applicable due date otherwise prescribed by law shall fulfill the requirements of this section and shall be deemed to be timely payment of such tax liability and timely filing of such return.

(2) (A) On or before the thirtieth calendar day following the date regulations implementing the provisions of this section become effective, the commissioner shall, by certified mail, notify taxpayers required to participate in the electronic funds transfer program of their responsibilities under such program. The notice shall also specify that the first payment of tax by electronic funds transfer shall be made on an applicable due date occurring on or after thirty calendar days following receipt by the taxpayer of the notice; provided, however, that the taxpayer may select an optional applicable due date occurring no later than sixty calendar days following receipt by the taxpayer of the notice.

(B) (i) By September first, two thousand two, the commissioner shall, by certified mail, notify taxpayers newly required to participate in the electronic funds transfer program during the July first, two thousand two through June thirtieth, two thousand three program period. Such notice shall contain language advising the taxpayer of the enrollment procedure and of the consequences of failure to enroll in such program, as well as of the taxpayer's obligation to enroll in the program within forty-five calendar days of the mailing of the notice unless such taxpayer challenges such determination of required participation by requesting a hearing within forty-five calendar days of the mailing of such notice. In addition, such notice shall specify that such a taxpayer shall make its first payment of tax by electronic funds transfer by an applicable due date in January, two thousand three.

(ii) By June first, two thousand three and by each succeeding June first, the commissioner shall, by certified mail, notify taxpayers newly required to participate in the electronic funds transfer program. Such notice shall contain language advising the taxpayer of the enrollment procedure and of the consequences of failure to enroll in such program, as well as of the taxpayer's right to challenge such determination of required participation provided a hearing is requested within twenty calendar days of the mailing of such notice. In addition, such notice shall specify that such a taxpayer shall make its first payment of tax by electronic funds transfer by an applicable due date occurring on or after thirty calendar days following receipt by the taxpayer of the notice but no later than sixty calendar days following receipt by the taxpayer of the notice.

(iii) If a taxpayer does not enroll within forty-five or twenty calendar days (as the case may be) of the mailing of the notice provided for in clause (i) or (ii) of this subparagraph or where a taxpayer's challenge to mandatory participation is not sustained and the taxpayer has not enrolled within ten calendar days of notification thereof, the commissioner shall mail another notice, in addition to making other reasonable attempts, to inform the taxpayer of the civil penalty that has been assessed pursuant to subdivision (h) of this section, of the opportunity for abatement of such penalty, and of the future penalties that may result from continued failure to enroll.

(3) Subject to the provisions of subdivision (f) of this section, an electronic funds transfer shall serve as a substitute for the filing of a withholding tax return.

(c) Special rules with respect to health care providers and educational organizations.

(1) The provisions of subdivision (b) of this section shall not apply to health care providers.

(2) All of the provisions of this section shall apply to educational organizations; provided, however, that any payment of tax which is made by an educational organization shall be made by electronic funds transfer on or before the third business day following the date otherwise prescribed by law; and, provided further, that at the election of a taxpayer subject to the provisions of this subdivision, mailing by the taxpayer of the applicable withholding tax return and a certified check for the amount of the tax liability on or before the first business day following the applicable due date otherwise prescribed by law shall fulfill the requirements of this section and shall be deemed to be timely payment of such tax liability and timely filing of such return.

(d) Exemptions. A taxpayer shall be exempt from the requirements contained in subdivision (b) of this section if such taxpayer proves to the satisfaction of the commissioner that aggregate tax withheld, pursuant to the most recent reconciliation of withholding, is less than one hundred thousand dollars.

(e) Voluntary participation. A taxpayer may file a request with the commissioner to pay any tax administered by such commissioner by electronic funds transfer in accordance with the provisions of this section. Such request shall be in such form as the commissioner shall require and shall be granted under such conditions as the commissioner, by regulation, deems necessary.

* (f) Return substitution. An electronic funds transfer shall not serve as a substitute for the filing of a withholding tax return if the commissioner determines that such substitution will not ensure the proper receipt and crediting of a payment of tax.

* NB Expired December 31, 1992

(g) Confidentiality. The department shall assure the confidentiality of information supplied by taxpayers in effecting electronic funds transfers in accordance with the provisions of section six hundred ninety-seven of this chapter or other applicable provisions of this chapter. The provisions of article six of the public officers law shall not apply to any such information supplied by taxpayers subject to the requirements of this section.

(h) Civil penalty for failure to enroll. If a taxpayer required to participate in the electronic funds transfer program prescribed by this section fails to enroll in such program in accordance with the terms of subparagraph (B) of paragraph two of subdivision (b) of this section, such taxpayer shall pay a penalty equal to five thousand dollars; provided, however, that if such taxpayer enrolls in the program within twenty calendar days after notification of assessment of such penalty is sent by the department by certified mail for program periods beginning on or after July first, two thousand two, then such penalty shall be abated. If such taxpayer continues to fail to enroll in the program after such twenty calendar day period, the taxpayer shall pay an additional penalty of five hundred dollars if the failure is for not more than one month with an additional five hundred dollars for each additional month or fraction thereof during which such failure continues. The penalty provided by this section shall be paid upon notice and demand and shall be assessed, collected and paid in the same manner as the withholding taxes referred to in paragraph one of subdivision (b) of this section; and any reference in the provisions of part VI of article twenty-two of this chapter, which apply to the administration of and procedures with respect to the provisions of this section, shall be deemed also to refer to the penalty provided by this section.

(i) Regulations. The commissioner shall promulgate regulations necessary to implement this section, which regulations shall include, but shall not be limited to, the following:

(1) the different methods of effecting electronic funds transfer messages available to taxpayers. Such methods shall include at least two methods in which the transfer can be effected without any charge to the taxpayer for the electronic funds transfer itself, and one of such methods shall not require the taxpayer to disclose financial institution account information to the department;

(2) the contents of an electronic funds transfer message necessary to ensure the proper receipt and crediting of a tax payment;

(3) the means by which taxpayers will be provided acknowledgements of payments by electronic funds transfer; and

(4) delineation of what shall constitute reasonable cause and absence of willful neglect for purposes of compliance with the provisions of this section, including the inability of a taxpayer, for reasons beyond the taxpayer's control, to utilize any system of electronic funds transfer required pursuant to this section.

Section 10. Electronic funds transfer by certain taxpayers remitting sales and compensating use taxes, prepaid sales and compensating use taxes on motor fuel and

diesel motor fuel, and motor fuel and petroleum business taxes. (a) Definitions. For purposes of this section:

(1) The term "commissioner" means the commissioner of taxation and finance.

(2) The term "electronic funds transfer" has the meaning prescribed in paragraph three of subdivision (a) of section nine of this chapter.

(3) The term "federal employer identification number" means the number assigned in accordance with section six thousand one hundred nine of the United States internal revenue code of nineteen hundred eighty-six, and amendments thereto, and regulations promulgated thereunder.

(4) The term "separate New York state employer identification number" means a number assigned by the department which is either a suffix to the federal employer identification number or an identifying number unrelated to the federal employer identification number.

(5) The term "payment of tax" means a payment or payment over of the taxes described in subparagraphs (A), (B) and (C) of paragraph one of subdivision (b) of this section.

(6) The term "taxpayer" means the person required to make a payment of tax.

(b) Participation rules. (1) General. Notwithstanding any other provision of law to the contrary, if, on or after June first of any year, during the June first through May thirty-first period which immediately precedes the previous June first through May thirty-first period, a taxpayer was liable for

(A) more than five hundred thousand dollars of state and local sales and compensating use taxes imposed by article twenty-eight and pursuant to the authority of article twenty-nine of this chapter where such taxes are administered by the commissioner, or

(B) more than five million dollars of prepaid state and local sales and compensating use taxes on motor fuel and diesel motor fuel imposed pursuant to section eleven hundred two of this chapter, or

(C) more than five million dollars of the total of the tax on gasoline and similar motor fuel and the tax on petroleum businesses imposed by and pursuant to the authority of articles twelve-A and thirteen-A of this chapter, then such taxpayer shall make payments of the taxes for which such dollar threshold was met by electronic funds transfer or certified check in accordance with the provisions of subdivision (c) of this section.

(2) Special transitional rule. Notwithstanding the provisions of paragraph one of this subdivision, for purposes of determining whether a taxpayer described in subparagraph (C) of such paragraph shall be required to initially participate in the program prescribed by this section, if such taxpayer was liable for more than three million seven hundred fifty thousand dollars in total article twelve-A and thirteen-A taxes during the September first, nineteen hundred ninety through May thirty-first, nineteen hundred ninety-one period, then such taxpayer shall make payments of tax by electronic funds transfer or certified check in accordance with the provisions of this section.

(3) Disaggregation. Every taxpayer who is identified by either its own federal employer identification number or its own separate New York state employer identification number shall be treated as a separate taxpayer for purposes of determining whether the dollar thresholds specified in paragraph one or two of this subdivision have been met. A taxpayer seeking a separate New York state employer identification number for a branch or division may apply to the commissioner for such a number. The commissioner, at his or her discretion, may assign such number upon a showing by the taxpayer of a legitimate business purpose for such request.

(4) Hardship. (A) If a taxpayer having liability described in subparagraph (A) of paragraph one of this subdivision can demonstrate to the satisfaction of the commissioner that (i) for the two most recent consecutive quarters, the state and local sales and compensating use taxes properly payable by such taxpayer are less than fifty percent of the state and local sales and compensating use taxes properly payable by such taxpayer for the comparable two quarters of the preceding year and (ii) the sum of such taxpayer's state and local sales and compensating use tax liability for such most recent consecutive quarters together with the product of the state and local sales and compensating use taxes properly payable by such taxpayer for the two consecutive quarters immediately preceding the quarters referred to in clause (i) of this subparagraph multiplied by the percentage arrived at under such clause is less than two hundred fifty thousand dollars in amount, then such taxpayer shall not be required to participate in the program prescribed by this section for the remaining quarters of the sales tax year ending on the next May thirty-first and for the immediately succeeding four sales tax quarters.

(B) If a taxpayer having liability described in subparagraph (B) or (C) of paragraph one of this subdivision can demonstrate to the satisfaction of the commissioner that (i) for the most recent six-month period, (I) the prepaid state and local sales and compensating use taxes on motor fuel and diesel motor fuel or (II) the total article twelve-A and thirteen-A taxes, as the case may be, properly payable by such taxpayer are less than fifty percent of such applicable taxes described in subclause (I) or (II), as the case may be, properly payable by such taxpayer for the comparable six-month period of the preceding year and (ii) the sum of such taxpayer's liability for such applicable taxes for the most recent six months together with the product of such applicable taxes properly payable by such taxpayer for the six-month period immediately preceding the six-month period referred to in clause (i) of this subparagraph multiplied by the percentage arrived at under such clause is less than two and one-half million dollars in amount, then such taxpayer shall not be required to participate in the program prescribed by this section for the remaining months of the period ending on the next May thirty-first and for the immediately succeeding twelve months.

(D) If a taxpayer required to remit state and local sales and compensating use taxes by electronic funds transfer or certified check pursuant to the provisions of this section can demonstrate to the satisfaction of the commissioner that (i) such taxpayer's liability for state and local sales and compensating use taxes was less than four million dollars during the period described in paragraph one of this subdivision, and (ii) in any two sales tax quarters within the most recent four consecutive sales tax quarters, such taxpayer was a materialman within the meaning of section two of the lien law, primarily engaged in furnishing building materials to contractors, subcontractors or repairmen for the improvement of real property improved or to be improved with a residential dwelling unit, and authorized by such law to file a mechanic's lien upon such real property and improvement, then such taxpayer need not remit state and local sales and compensating use taxes by electronic funds transfer or certified check for the remainder of the program period in accordance with the timing requirements of subdivision (c) of this section, but may instead remit such taxes by electronic funds transfer or certified check at the same time that payment is required to be made for part-quarterly and quarterly returns required to be filed under article twenty-eight and pursuant to the authority of article twenty-nine of this chapter, in the amount required under or pursuant to such articles at such time. The due date prescribed by this subparagraph shall be deemed to be the applicable due date for purposes of this section for taxpayers qualifying under this subparagraph. The provisions of this section shall apply to taxpayers qualifying under this subparagraph, except to the extent that any such provision is either inconsistent with a provision of this subparagraph or is not relevant to this subparagraph.

(c) Payment rules. (1) Payment by electronic funds transfer or certified check. On or before the third business day following the twenty-second day of each calendar month:

(A) a taxpayer having liability described in subparagraph (A) of paragraph one of subdivision (b) of this section shall, notwithstanding any provision of this chapter to the contrary, remit by electronic funds transfer or certified check: (i) either (I) seventy-five percent of one-third of the state and local sales and compensating use taxes properly payable by such taxpayer for the comparable quarter of the preceding year; or

(II) such taxpayer's total liability for state and local sales and compensating use taxes during the period ending on such twenty-second day of the month, provided, however, that in such instance no penalty or interest shall be payable pursuant to paragraph two of subdivision (g) of this section if such taxpayer timely remits a payment of tax in an amount not less than ninety percent of the taxes as finally determined to be due and payable for such period; and

(ii) (I) for payments of tax due in the month of January, February, April, May, July, August, October or November, such taxpayer's remaining liability, if any, for state and local sales and compensating use taxes for the immediately preceding calendar month; or

(II) for payments of tax due in the month of March, June, September or December, such taxpayer's remaining liability, if any, for state and local sales and compensating use taxes for the immediately preceding sales tax quarter;

(B) a taxpayer having liability described in subparagraph (B) of paragraph one of subdivision (b) of this section shall remit by electronic funds transfer or certified check either:

(i) three-fourths of the prepaid state and local sales and compensating use taxes on motor fuel and diesel motor fuel properly payable by such taxpayer for the comparable month of the preceding year; or

(ii) its total liability for prepaid state and local sales and compensating use taxes on motor fuel and diesel motor fuel during the period ending on such twenty-second day of the month, provided, however, that in such instance no penalty or interest shall be payable pursuant to paragraph two of subdivision (g) of this section if such taxpayer timely remits a payment of tax in an amount not less than ninety percent of the taxes as finally determined to be due and payable for such period;

(C) a taxpayer having liability described in subparagraph (C) of paragraph one of subdivision (b) of this section shall remit by electronic funds transfer or certified check either:

(i) three-fourths of the total article twelve-A and article thirteen-A taxes properly payable by such taxpayer for the comparable month of the preceding year; or

(ii) its total liability for such taxes during the period ending on such twenty-second day of the month, provided, however, that in such instance no penalty or interest shall be payable pursuant to paragraph two of subdivision (g) of this section if such taxpayer timely remits a payment of tax in an amount not less than ninety percent of the taxes as finally determined to be due and payable for such period.

(2) Filing obligations and payment of remaining liabilities. (A) A taxpayer having liability described in subparagraph (A) of paragraph one of subdivision (b) of this section shall, notwithstanding any provision of this chapter to the contrary, file only the quarterly returns required under article twenty-eight and pursuant to the authority of article twenty-nine of this chapter for each of the periods for which such returns are filed under and pursuant to the authority of such articles; provided, however, that for those months for which a return is not required to be filed pursuant to the provisions of this subparagraph, the making of a payment of tax by electronic funds transfer or certified check covering any period shall be deemed to constitute the filing of a return for purposes of subdivision (b) of section eleven hundred forty-seven of this chapter with respect to such period.

(B) A taxpayer having liability described in subparagraph (B) of paragraph one of subdivision (b) of this section shall file the returns required under section eleven hundred two of this chapter and shall pay to the commissioner the amounts required to be paid with such returns, less the amounts remitted by electronic funds transfer or certified check under this section, for each of the periods for which such returns are filed under such section.

(C) A taxpayer having liability described in subparagraph (C) of paragraph one of subdivision (b) of this section shall file the returns required under and pursuant to the authority of articles twelve-A and thirteen-A of this chapter and shall pay to the commissioner the amounts required to be paid with such returns, less the amounts remitted by electronic funds transfer or certified check under this section, for each of the periods for which such returns are filed under and pursuant to the authority of such articles.

(3) Payment date; payment by certified check. Payment of tax by electronic funds transfer or certified check shall be made to a bank, banking house or trust company designated by the commissioner. The commissioner shall designate only such banks, banking houses or trust companies as are or shall be designated by the comptroller as depositories pursuant to section one hundred seventy-one-a of this chapter, as added by chapter sixty-nine of the laws of nineteen hundred seventy-eight. Notwithstanding any other provision of law to the contrary, any electronic funds transfer shall be deemed to be made on the date payment is received by the depository of the department, provided, however, that at the election of a taxpayer subject to the provisions of this section, mailing by the taxpayer of a certified check for the amount of the tax liability on or before the second business day prior to the applicable due date prescribed by paragraph one of this subdivision shall fulfill the requirements with respect to payments of tax by electronic funds transfer prescribed by this section and shall be deemed to be timely payment of such tax liability.

(4) Special payment rule. If a taxpayer is liable for payment of taxes described in two or more of subparagraphs (A), (B) and (C) of paragraph one of subdivision (b) of this section, then such taxpayer shall make separate payment by electronic funds transfer or certified check of the taxes described in each of such subparagraphs.

(d) Enrollment and initial payment; duration of participation. Within forty-five days after each June first, the commissioner shall notify by certified or registered mail all taxpayers required to participate in the program prescribed by this section. Such notice shall contain language advising the taxpayer of the enrollment procedure and of the consequences of failure to enroll in such program, as well as of a taxpayer's right to challenge such determination of required participation provided a hearing is requested within forty days of the mailing of such notice. If a taxpayer does not enroll within forty days of the mailing of such certified or registered notice of required participation or where a taxpayer's challenge is not sustained and the taxpayer has not enrolled within ten days of notification thereof, the commissioner shall mail another notice, in addition to making other reasonable attempts, to inform the taxpayer of the civil penalty that has been assessed pursuant to paragraph one of subdivision (g) of this section, of the opportunity for abatement of such penalty, and of the future penalties that may result from continued failure to enroll and failure to pay by electronic funds transfer or certified check or to file; provided, however, that for the program period beginning December first, nineteen hundred ninety-two through August thirty-first, nineteen hundred ninety-three, the thirty-day period referred to in this sentence shall be read as forty-five days. A taxpayer shall make its first payment of tax by electronic funds transfer or certified check on or before the applicable due date prescribed by subdivision (c) of this section for the month of December in nineteen hundred ninety-two, the month of September in nineteen hundred ninety-three and the month of September for any year thereafter. Unless otherwise provided by this section, such taxpayer shall continue to make payments of tax by electronic funds transfer or certified check in accordance with the provisions of this section through the succeeding month of August and shall continue to make such payments of tax for each succeeding September-to-August period where such taxpayer meets the criteria of subdivision (b) of this section and is properly notified by the commissioner pursuant to the enrollment provisions of this subdivision. Provided, however, that:

(1) A taxpayer described in subparagraph (A) of paragraph one of subdivision (b) of this section who is newly required to participate in the program for the September first, nineteen hundred ninety-four through August thirty-first, nineteen hundred ninety-five period shall have forty-five days to enroll in the program and shall make its first payment of tax by electronic funds transfer or certified check on or before the applicable due date prescribed by subdivision (c) of this section for the month of December in nineteen hundred ninety-four; and

(2) A taxpayer described in subparagraph (A) of paragraph one of subdivision (b) of this section who is newly required to participate in the program for the September first, nineteen hundred ninety-five through August thirty-first, nineteen hundred ninety-six period shall make its first payment of tax by electronic funds transfer or certified check on or before the applicable due date prescribed by subdivision (c) of this section for the month of December in nineteen hundred ninety-five.

(e) Voluntary participation. A taxpayer who is not required to participate in the program prescribed by this section but who is required to remit any of the taxes specified in subparagraph (A), (B) or (C) of paragraph one of subdivision (b) of this section may file a request with the commissioner to remit any of such taxes by electronic funds transfer or certified check in accordance with the provisions of this section. Such request shall be in a form as the commissioner shall require and shall be granted under such conditions as the commissioner in his or her discretion shall deem necessary.

(f) Confidentiality. The department shall assure the confidentiality of information supplied by taxpayers in effecting payments of tax pursuant to this section in accordance with the provisions of sections three hundred fourteen and eleven hundred forty-six of this chapter and any other applicable provisions of law. The provisions of article six of the public officers law shall not apply to any such information supplied by taxpayers subject to this section.

(g) Civil penalties and interest. (1) Failure to enroll. If a taxpayer required to participate in the program prescribed by this section fails to enroll in such program in accordance with the terms set forth in subdivision (d) of this section, such taxpayer shall pay a penalty equal to five thousand dollars; provided, however, that if such taxpayer enrolls in the program within thirty days after notification of assessment of such penalty is sent by the department by certified or registered mail return receipt requested, then such penalty shall be abated. If such taxpayer continues to fail to enroll in the program after such thirty-day period, the taxpayer shall pay an additional penalty of five hundred dollars if the failure is for not more than one month, with an additional five hundred dollars for each additional month or fraction thereof during which such failure continues.

(2) Failure to pay or late payment. (A) A taxpayer required or approved to participate in the program prescribed by this section who fails to make a payment of tax by electronic funds transfer or certified check on or before the applicable due date prescribed by subdivision (c) of this section, or who fails to pay any tax required to be remitted on or before such applicable due date shall, in the case of the taxes imposed pursuant to article twenty-eight and pursuant to the authority of article twenty-nine of this chapter, be liable for penalty and interest as prescribed by subparagraphs (i) and (ii) of paragraph one of subdivision (a) of section eleven hundred forty-five of this chapter, and in the case of the taxes imposed by and pursuant to the authority of articles twelve-A and thirteen-A of this chapter, be liable for penalty and interest as prescribed by paragraphs (a) and (b) of subdivision one of section two hundred eighty-nine-b of this chapter.

(B) Notwithstanding any provision of law to the contrary, if a taxpayer described in subparagraph (B) or (C) of paragraph one of subdivision (b) of this section fails to make a payment of tax by electronic funds transfer or certified check on or before the applicable due date prescribed by subdivision (c) of this section or fails to pay any tax required to be remitted on or before such applicable due date, as prescribed by subparagraph (A) of this paragraph, and also fails to pay or pay over to the commissioner the amounts required to be paid or paid over with the applicable return described in paragraph two of subdivision (c) of this section due the twentieth day of the following month, then penalty and interest for such additional failure, as provided by subparagraphs (i) and (ii) of paragraph one of subdivision (a) of section eleven hundred forty-five of this chapter or paragraphs (a) and (b) of subdivision one of section two hundred eighty-nine-b of this chapter, as the case may be, shall be computed on the amount equal to the difference between the total of the amount of tax due or determined to be due with such return and the total of the amount of tax required to be paid by electronic funds transfer or certified check on or before the applicable due date prescribed by subdivision (c) of this section for the preceding month.

(3) Failure to file required returns. A taxpayer required or approved to participate in the program prescribed by this section who complies with the payment requirements of subdivision (c) of this section (including the payment of remaining liabilities described in paragraph two of such subdivision), but who fails to file any return required pursuant to article twelve-A, thirteen-A, twenty-eight or twenty-nine of this chapter, as the case may be, for the period for which such payments were timely and fully paid or paid over, shall be liable for a penalty equal to five hundred dollars.

(h) Administration. Except as otherwise provided in this section, the provisions of part IV of article twenty-eight of this chapter shall apply to the administration of and procedures with respect to the provisions of this section relating to the taxes described by subparagraph (A) of paragraph one of subdivision (b) of this section, the provisions of section eleven hundred two of this chapter relating to the administration of and procedures with respect to such section shall apply to the administration of and procedures with respect to the provisions of this section relating to the taxes described by subparagraph (B) of such paragraph one, and the provisions of article twelve-A relating to the administration of and procedures with respect to such article shall apply to the provisions of this section relating to the taxes described in subparagraph (C) of such paragraph one.

(i) Regulations. The commissioner shall have the authority to promulgate regulations in order to implement the provisions of this section.

Section 11. Certified capital companies.

(a) Definitions. For the purpose of this section the following terms shall mean:

(1) "Certification date" - the date on which a certified capital company is so designated by the department for a specific certified capital company program.

(2) "Certified capital" - an investment of cash by a certified investor in a certified capital company which fully funds the purchase price of either or both its equity interest in the certified capital company or a qualified debt instrument issued by the certified capital company. Any such investment shall be subject to the provisions of article fourteen of the insurance law.

(3) "Certified capital company" - a partnership, corporation, trust or limited liability company, organized on a for-profit basis that is located, headquartered and licensed or registered to conduct business in New York, that has as its primary business activity the investment of cash in qualified businesses and that is certified by the department as meeting the criteria set forth in subdivision (b) of this section.

(4) "Certified investor" - any insurance company that contributes certified capital.

(5) "Department" - the department of financial services; provided, however, that "department" shall mean the department of economic development with regard to any application, certification, report, submission, filing or other action required or governed by this section occurring on or after August first, two thousand eleven.

(6) "Net profits on certified investments" - the amount of money returned to the certified capital company in repayment of or exchange for the certified capital company's qualified investment or investments in the qualified business in excess of the amount of such qualified investment or investments. Such number shall aggregate all of the certified capital company's qualified investments where gains on qualified investments are netted against losses on qualified investments.

(7) "Qualified business" - an independently owned and operated business that meets all of the following conditions as of the time of the first investment in the business:

(A) It is headquartered in New York state, and its principal business operations are located in New York state, and the qualified investment it receives is used solely to support its business operations in the state, except for advertising, promotions and sales purposes. In cases where the qualified investment is made in a start-up company such capital must be used solely to establish and support its business operations in New York state, except for advertising, promotions and sales purposes.

(B) It has either (i) no more than one hundred employees, at least eighty percent of whom are employed in New York state or, (ii) no more than two hundred employees, at least eighty percent of whom are employed in this state, and during the fiscal year immediately preceding the qualified investment it had, together with its affiliates, gross revenues of no more than five million dollars, on a consolidated basis as determined in accordance with generally accepted accounting principles, except that, with respect to certified capital company program three and certified capital company program four and certified capital company program five, in the case of a company located in an empire zone established pursuant to article eighteen-B of the general municipal law such gross revenues shall not exceed eight million dollars.

(C) It is involved in commerce for the purpose of developing and manufacturing products and systems, including but not limited to high technology products and systems such as computers, computer software, medical equipment, biotechnology, telecommunications equipment and products, processing or assembling all types of products, conducting research and development on all types of products or providing services, but excluding real estate, real estate development, insurance and businesses predominantly engaged in professional services provided by accountants, lawyers or physicians.

(D) The business was not organized by a certified capital company or an affiliate of a certified capital company, but this paragraph shall not prohibit a certified capital company from providing financial, technical or similar advice to a business before making an investment in such business.

(E) The business does not have a financial relationship, such as an ownership interest, investment interest, or compensation agreement, with a certified capital company or any affiliate of a certified capital company before the date on which a certified capital company makes its first investment in the business, but this paragraph shall not prohibit a certified capital company from providing financial, technical or similar advice to a business before making an investment in such business.

(F) For purposes of this paragraph, the term "independently owned and operated business" means (i) in the case of a corporation or limited liability company, a corporation where no more than fifty percent of the voting stock of the corporation or limited liability company is owned or controlled, directly or indirectly, by a single corporation, a single partnership or a single limited liability company, and (ii) in the case of a partnership, association, or other entity, a partnership, association or other entity where no more than fifty percent of the capital, profits or other beneficial interest in such partnership, association or other entity is owned or controlled, directly or indirectly, by a single corporation, a single partnership or a single limited liability company; provided, however, that the term shall include, as a single "independently owned and operated business," parent and subsidiary or affiliated corporations or limited liability companies (i) that are engaged in an integrated for-profit business enterprise, and (ii) in which at least eighty percent of the voting stock or membership interests of all of the corporations or limited liability companies is owned or controlled, directly or indirectly, by a common group of shareholders or members, and no more than fifty percent of the voting stock or membership interests of all of the corporations or limited liability companies is owned or controlled, directly or indirectly, by a single corporation, single partnership, or single limited liability company that is not part of such group or parent company or affiliated corporations or limited liability companies.

(8) "Qualified debt instrument" - a debt instrument issued by a certified capital company, at par value or a premium, with an original maturity date of at least five years from date of issuance, a repayment schedule which is not faster than a level principal amortization, and interest, distribution or payment features which are not related to the profitability of the certified capital company or the performance of the certified capital company's investment portfolio.

(9) "Qualified distribution" - any distribution or payment by a certified capital company in connection with the following:

(A) Reasonable costs and expenses of such equity holders incurred by such equity holders in connection with forming, syndicating, managing and operating the certified capital company, including (i) an annual management fee in an amount that does not exceed two and one-half percent of the certified capital of the certified capital company with respect to a particular certified capital company program; (ii) the reasonable and necessary fees paid for professional services (such as legal and accounting services) related to the operation of the certified capital company; (iii) with respect to program four and any subsequent program, all payments by the certified capital company in satisfaction of its indebtedness to its certified investors, provided that no more than thirty-five percent of such certified capital company's certified capital may be used to purchase U.S. treasury securities, other investment-grade securities, a guaranty, indemnity, bond, insurance policy or other payment undertaking, or any combination thereof; and provided further, that nothing in this provision shall be construed to limit a certified capital company from expending non-certified capital in satisfaction of such indebtedness; and (iv) with respect to program four and any subsequent program, the reasonable costs and expenses of forming, syndicating, or organizing the certified capital company, separate from the costs of insuring or defeasing the obligations of the certified capital company, provided, however, that such costs and expenses shall not exceed five percent of the certified capital company's certified capital; and

(B) Any increase or projected increase in federal or state taxes, including penalties and interest related to state and federal income taxes, of the equity owners of a certified capital company resulting from the earnings or other tax liability of the certified capital company to the extent that the increase is related to the ownership, management or operation of a certified capital company.

(10) "Qualified investment" - the investment of cash by a certified capital company in a qualified business for the purchase of any debt, equity or hybrid security, of any nature and description whatever, including a debt instrument or security which has the characteristics of debt but which provides for conversion into equity or equity participation instruments such as options or warrants, provided however, in the case of certified capital programs three, four and five, that any such debt instrument have a maturity of at least twenty-four months from the date such debt is incurred; and further provided that a certified capital company, after the investment and assuming full conversion and exercise of any equity participation instruments, shall not own more than fifty percent of the voting equity of the qualified business, except in the case of a follow-on investment where a specific exemption is granted by the department under subparagraph (D) of paragraph one of subdivision (c) of this section. Furthermore, except in the case of a follow-on investment, if a certified capital company owns more than fifteen percent of the equity in a company or has a seat on the board of directors of such company, then a certified capital company cannot invest in such company unless the following conditions are met: (i) at least one other investor who is not an affiliate of the certified capital company participates in the same round of investment on the same terms and conditions as the certified capital company; and (ii) the certified capital company and its affiliates invest no more than fifty percent of the total investment made in that round of investment.

(11) "Early stage business" - a qualified business which is involved, at the time of investment, in activities related to the development of initial product or service offerings, such as prototype development or establishment of initial production or service processes, or, which is less than two years old and during the fiscal year immediately preceding the qualified investment had, together with its affiliates, gross revenues of no more than two million dollars, on a consolidated basis as determined in accordance with generally accepted accounting principles.

(12) "Superintendent" - the superintendent of financial services; provided, however, that "superintendent" shall mean the commissioner of economic development with regard to any application, certification, report, submission, filing or other action required or governed by this section occurring on or after August first, two thousand eleven.

(13) "Certified capital company program" - a calendar year or years for which taxpayers may be allocated and allowed credits pursuant to this section and subdivision (k) of section fifteen hundred eleven of this chapter and delineated as a separate program by this section.

(14) "Starting date" - the date on which a certified capital company is allocated certified capital for a specific certified capital company program pursuant to subdivision (b) of this section.

(15) "Underserved area" - a county, including a county wholly within a city, in which, as of January first, two thousand, less than twenty-five percent of the qualified investments in qualified businesses were made by certified capital companies under certified capital company program one. The superintendent shall prepare a list of such counties by July first, two thousand.

(16) "Start-up business" - a qualified business which is involved, at the time of investment, in activities related to the development of initial product or service offerings, such as prototype development or establishment of initial production or service processes, or, which is less than two years old and during the fiscal year immediately preceding the qualified investment had, together with its affiliates, gross revenues of no more than two million dollars, on a consolidated basis as determined in accordance with generally accepted accounting principles and has fewer than twenty employees at the time of the investment; and, in addition, which has emerged within the year prior to the date of investment or is emerging from, or utilizes a technology transferred from, a university or college research facility located in New York state, a not-for-profit research facility located in New York state, or an industrial research facility located in New York state, or which is conducting research in conjunction with or in the research facilities of a university or college located in New York state, or which is located in or has emerged within the year prior to the date of investment or is emerging from an incubator facility located in New York state.

(b) Certification. (1) The superintendent shall establish by rule or regulation the procedures for making an application to become a certified capital company. The applicant shall pay a non-refundable application fee of five hundred dollars at the time of filing the application with the department.

(2) The superintendent may certify partnerships, corporations, trusts or limited liability companies, organized on a for profit basis, which submit an application to be designated as a certified capital company if such applicant is located, headquartered and licensed or registered to conduct business in New York, has as its primary business activity the investment of cash in qualified businesses and meets the other criteria set forth in this subdivision.

(3) A certified capital company's initial capitalization, at the time of seeking certification, must be five hundred thousand dollars or more.

(4) The superintendent shall review the organizational documents of each applicant for certification and the business history of the applicant, determine that the applicant's cash, marketable securities and other liquid assets are at least five hundred thousand dollars, and determine that the officers and the board of directors, general partners, trustees, managers, or members are trustworthy and are thoroughly acquainted with the requirements of this subdivision.

(5) The superintendent shall verify that at least two principals of the certified capital company or any manager of the certified capital company each have no less than five years of experience in the venture capital or a venture capital-related industry.

(6) Any offering material involving the sale of securities of the certified capital company shall include the following statement:

"Authorizing the formation of a Certified Capital Company does not constitute the endorsement of the state of New York as to either the quality of management or the potential for earnings of such company and the state of New York is not liable for damages or losses to a Certified Investor in the company. Use of the word 'certified' in an offering does not constitute a recommendation or endorsement of the investment by the state of New York.

Investments in a prospective Certified Capital Company prior to the time such company is certified with respect to a certified capital company program are not eligible for tax credits. In the event certain statutory provisions (as specified in section 11 of the Tax Law) are violated, the state of New York may require forfeiture of unused tax credits and repayment of used tax credits."

(7) Within sixty days of application, the superintendent shall issue the certification or shall refuse the certification and communicate in detail to the applicant the grounds for the refusal, including suggestions for the removal of those grounds.

(8) The superintendent may certify any previously certified capital company which has remained in compliance with the requirements of this section upon the application of such company to be designated a certified capital company for a certified capital company program for which it is not so designated. Such new certification shall be considered a separate certification from any other such certification under this section and investments in and by such company shall be considered separately for purposes of subdivisions (c) and (d) of this section.

(9) The superintendent shall start accepting applications to become a certified capital company in certified capital company program two by November first, nineteen hundred ninety-nine, and shall start accepting applications to become a certified capital company in certified capital company program three by August first, two thousand, and shall begin accepting applications to become a certified capital company in certified capital company program four by the later of August first, two thousand four or not more than sixty days after the effective date of section one of part D of chapter fifty-nine of the laws of two thousand four and shall begin accepting applications to become a certified capital company in certified capital company program five by the later of July first, two thousand five or not more than sixty days after the effective date of the chapter of the laws of two thousand five which amended this paragraph.

(10) A certified capital company may obtain a guaranty, indemnity, bond, insurance policy and/or other payment undertaking for the benefit of its certified investors from any entity; provided, however, that, in no case shall more than one certified investor of such certified capital company or affiliates of such certified investor be entitled to provide such guaranty, indemnity, bond, insurance policy and/or other payment undertaking in favor of the certified investors of the certified capital company and its affiliates in this state.

(c) Requirements for continuance of certification. (1) To continue to be certified with respect to a particular certified capital company program, a certified capital company must make qualified investments according to the following schedule:

(A) Within two years after the starting date of a specific certified capital company program of a certified capital company, at least twenty-five percent of its certified capital allocable to such certified capital company program must be placed in qualified investments.

(B) Within three years after the starting date of a specific certified capital company program of a certified capital company, at least forty percent of its certified capital allocable to such certified capital company program must be placed in qualified investments.

(C) Within four years after the starting date of a specific certified capital company program of a certified capital company, at least fifty percent of its certified capital allocable to such certified capital company program must be placed in qualified investments, at least fifty percent of which must have been placed in early stage businesses, except that in the case of program four and any subsequent program, at least twenty-five percent of which must have been placed in early stage businesses and an additional twenty-five percent of which must have been placed in start-up businesses, and except that in the case of qualified investments made in qualified businesses located in empire zones established pursuant to article eighteen-B of the general municipal law under the provisions of certified capital company program three, program four and program five from allocations of certified capital made specifically for such targeted investments in such zones, the requirement for qualified investments in early stage and start-up businesses shall not apply.

(D) A certified capital company, at least fifteen working days prior to making a proposed investment in a specific business, shall certify in writing to the superintendent that (i) the business in which it proposes to invest meets the definition of a qualified business as set forth in subdivision (a) of this section or, in the case of a follow-on investment, that such business continues to meet the requirements set forth in subparagraphs (A) and (C) of paragraph seven of subdivision (a) of this section and, in either case, an explanation of its determination that the business meets such requirements, and (ii) with respect to certified capital company program three, program four and program five, whether or not such business is located in an empire zone established pursuant to article eighteen-B of the general municipal law or in an underserved area outside an empire zone. The certification to the superintendent shall include a sworn statement from the business in which the certified capital company proposes to invest, which statement shall evidence the intention of the business to maintain its headquarters in New York and conduct its primary business operations in the state of New York after its receipt of the investment by the certified capital company. If the superintendent determines that the business does not meet the definition of a qualified business, or, in the case of a follow-on investment, that such business does not meet the requirements set forth in subparagraphs (A) and (C) of paragraph seven of subdivision (a) of this section, then it shall, within the fifteen working day period prior to the making of the proposed investment, notify the certified capital company of its determination and provide an explanation thereof, provided, however, that the department may, upon written request of a certified capital company and at the discretion of the department, grant, in writing, an exemption to the percentage limitations of paragraph ten of subdivision (a) of this section.

(E) All certified capital not placed in qualified investments by the certified capital company may be held or invested in such manner as the certified capital company, in its discretion, deems appropriate. The proceeds of all certified capital returned to a certified capital company after being originally placed in qualified investments may be placed again in qualified investments and shall count toward any requirement in this subdivision with respect to placing certified capital in qualified investments.

(F) If within ten years after the starting date of certified capital company program four or program five, and within twelve years after the starting date of certified capital company programs one, two, and three, one hundred percent of the certified capital allocable to a certified capital company participating in such program has not been placed in qualified investments, the specific certified capital company shall no longer be permitted to receive management fees; provided that such restriction shall not apply (i) with respect to certified capital company programs one, two, and three, to any certified capital company that has not, prior to October thirty-first, two thousand four, received, as opposed to accrued, any management fees, or (ii) with respect to any certified capital company program, to a certified capital company in which at least fifty percent of the voting stock, capital, membership interests, or other beneficial ownership interests, as the case may be, are owned by an entity that is managed, directly or indirectly, by a non-profit corporation.

(2) Any business which is classified as a qualified business at the time of the first investment in said business by a certified capital company shall remain classified as a qualified business and may receive follow-on investments from any certified capital company, and such follow-on investments shall be qualified investments even though such business may not meet the definition of a qualified business at the time of such follow-on investments, provided, however, that such business continues to meet the requirements set forth in subparagraphs (A) and (C) of paragraph seven of subdivision (a) of this section, and such business reaffirms its intention to maintain its headquarters in New York and conduct its primary business operations in the state of New York as required in subparagraph (D) of paragraph one of this subdivision.

(3) No qualified investment may be made by a certified capital company to the extent such investment would cause the company's total qualified investment outstanding with respect to the qualified business receiving such investment to exceed fifteen percent of the total certified capital of the certified capital company at the time of such investment.

(4) Documents and other materials submitted by certified capital companies or by businesses for purposes of the continuance of certification shall not be public records if such records are determined by the superintendent to be trade or business secrets and shall be maintained in a confidential manner by the superintendent.

(5) The aggregate cumulative amount of all qualified investments made by the certified capital company for a certified capital company program from its starting date for such program will be considered in the calculation of the percentage requirements under subparagraphs (A), (B) and (C) of paragraph one of this subdivision, provided, however, that any amounts received by a certified capital company from a qualified business as (i) commitment fees, closing fees, or other similar fees (excluding reimbursement of out-of-pocket expenses, including legal fees and accounting fees) in excess of one percent of the certified capital company's investment in the qualified business or (ii) license fees, royalties, or similar charges shall not be considered in any of the percentage calculations under this section.

(6) Each certified capital company shall report the following to the superintendent:

(A) As soon as practicable after the receipt of certified capital or an irrevocable funding commitment subject only to the receipt of an allocation pursuant to subdivision (h) of this section, (i) the name of each certified investor from which the certified capital was received, including such certified investor's insurance tax identification number; (ii) the amount of each certified investor's investment of certified capital; and (iii) the date on which the certified capital was received. Provided, however, that requests for allocation of tax credits with respect to certified capital company program two by certified capital companies on behalf of their certified investors which are received by the superintendent on or before March first, two thousand shall be treated as having been received on March first, two thousand for tax credits to be utilized in two thousand one, and if satisfactory, shall be given equal priority for allocation, and provided, however, that requests for allocation of tax credits with respect to certified capital company program three by certified capital companies on behalf of their certified investors which are received by the superintendent on or before December first, two thousand shall be treated as having been received on December first, two thousand for tax credits to be utilized in two thousand two, and if satisfactory, shall be given equal priority for allocation, and provided, however, that requests for allocation of tax credits with respect to certified capital company program four by certified capital companies on behalf of their certified investors which are received by the superintendent on or before December first, two thousand four shall be treated as having been received on December first, two thousand four for tax credits to be utilized in two thousand six, and if satisfactory, shall be given equal priority for allocation, and provided, however, that requests for allocation of tax credits with respect to certified capital company program five by certified capital companies on behalf of their certified investors which are received by the superintendent on or before the later of (i) November first, two thousand five and (ii) the one hundred twentieth day after the date on which the superintendent began accepting applications for certification in connection with certified capital company program five pursuant to paragraph nine of subdivision (b) of this section shall be treated as having been received on such later date for tax credits to be utilized in two thousand seven, and if satisfactory, shall be given equal priority for allocation.

(B) On an annual basis, on or before January thirty-first of each year, (i) the amount of the certified capital company's certified capital at the end of the immediately preceding year; (ii) whether or not the certified capital company has invested more than fifteen percent of its total certified capital in any one business; (iii) all qualified investments that the certified capital company made during the previous calendar year, including the number of employees of each qualified business in which it has made investments at the time of such investment and as of December first of the preceding calendar year. For any qualified business where the certified capital company no longer has an investment, the certified capital company shall provide employment figures for such company as of the last day before the investment was terminated. Such report shall provide a separate accounting by each certified capital company program; and (iv) all qualified investments made in empire zones and underserved areas outside such empire zones as required under certified capital company program three, certified capital company program four and certified capital company program five.

(C) Each certified capital company shall provide to the superintendent annual audited financial statements, which shall include the opinion of an independent certified public accountant, within ninety days of the close of its fiscal year. The audit shall address whether the funds received by the certified capital company have been invested as required under subparagraphs (A), (B) and (C) of paragraph one of this subdivision. Upon receiving notification and documentation by a certified capital company that it has satisfied the requirements of subparagraph (C) of paragraph one of this subdivision that it has invested fifty percent of its certified capital, the department shall have sixty days to notify such certified capital company that it has or has not met such requirement, with a reason for such determination if it has not, in the judgment of the department, met such requirement. If the department does not provide such notification within sixty days, the certified capital company shall then be deemed to have met such requirement.

(D) On or before April first of each year, each certified capital company shall pay an annual, non-refundable certification fee of five hundred dollars to the superintendent; provided that no such fee shall be required within six months of the initial certification date of a certified capital company.

(E)(1) Within thirty days of the decision on an application for certification pursuant to subdivision (b) of this section, the superintendent shall submit a copy of such application and the related decision to the department of taxation and finance. The superintendent shall submit a copy of all filings of certifications pursuant to subparagraph (D) of paragraph one of this subdivision and any determination made thereon within fifteen days of such filing.

(2) The superintendent shall annually, by March first, submit to the department of taxation and finance a list of persons who may claim the tax credit for the previous taxable year and any other information necessary to assist the department of taxation and finance to determine eligibility for such tax credit.

(d) Distributions. (1) A certified capital company may make qualified distributions at any time. In order for a certified capital company to make a distribution other than a qualified distribution from a certified capital company program, to its equity holders, either (A) the aggregate cumulative amount of all qualified investments for such program must equal or exceed one hundred percent of its certified capital allocable to such certified capital company program, or (B) it must have received written authorization to make such distribution from the superintendent. In no event, however, shall any such distribution to its equity holders, other than a qualified distribution, be made by a certified capital company from a certified capital company program unless an amount equal cumulatively to at least ninety percent of its certified capital of such program is invested in companies that conduct their principal business operations in New York state.

(2) In the event that a business in which a qualified investment is made relocates its principal business operations to another state during such investment, or within three months after the termination of such investment, the cumulative amount of qualified investment shall be reduced by the amount of such qualified investment, for the purposes of this subdivision only, unless (A) the certified capital company invests an amount at least equal to the investment of certified capital in the relocated business in a qualified business located in New York state within six months of the relocation or (B) unless the business demonstrates that it has returned its principal business operations to New York state within three months of such relocation. A business shall be deemed to have relocated its principal business operations outside New York state if the primary workplace of more than fifty percent of the employees of such business within the state is relocated to another state.

(3) In the event that a business in which a qualified investment is made under certified capital company program three, certified capital company program four or certified capital company program five, relocates its principal business operation within the earlier of four years after the date of such qualified investment or three months after the termination of such investment, whereby the requirements of paragraph three of subdivision (h) of this section to make qualified investments in qualified businesses located in empire zones established pursuant to article eighteen-B of the general municipal law or in underserved areas outside such empire zones no longer are satisfied, the cumulative amount of qualified investment shall be reduced by the amount of such qualified investment, for the purposes of this subdivision only, unless (A) the certified capital company invests an amount at least equal to the investment of certified capital in the relocated business in a qualified business located in either an empire zone or in an underserved area outside an empire zone so that the requirements of paragraph three of subdivision (h) of this section are again satisfied within six months of such relocation, unless the certified capital company certifies to the superintendent that a good faith effort was made to make additional qualifying investments under the requirements of paragraph three of subdivision (h) of this section, or (B) the business demonstrates that it has returned its principal business operation to New York state in either an empire zone or in an underserved area outside an empire zone within three months of such relocation, or (C) the business demonstrates that it had a valid business purpose for relocating its principal business operation. A business shall be deemed to have relocated its principal business operations outside of an empire zone or an underserved area outside an empire zone if the primary workplace of more than fifty percent of the employees of such business within an empire zone or an underserved area outside an empire zone is relocated to an area outside the state or outside an empire zone or an underserved area outside an empire zone.

(4) Payments to debt holders of a certified capital company may be made without restriction with respect to repayments of principal and interest on indebtedness owed to them by a certified capital company, including indebtedness of the certified capital company on which certified investors earned tax credits. A debt holder that is also a certified investor or equity holder of a certified capital company may receive payments with respect to such debt without any restriction whatsoever.

(5) A certified capital company that receives certified capital investments under program four and any subsequent program shall pay to the department for deposit in the general fund an amount equal to thirty percent of the net profits on qualified investments. A certified capital company shall make all payments required under this paragraph concurrently with and pro rata to distributions of profits and gains to its equity owners; however, nothing contained in this paragraph shall be construed to affect qualified distributions.

(6) The amount of any payment required under paragraph five of this subdivision shall be reduced to fifteen percent of such net profits on qualified investments if, at the time of such net profits distribution, such certified capital company irrevocably commits to both: (A) re-invest the remaining fifteen percent of such net profits not being paid to the general fund under paragraph five of this subdivision into qualified businesses, and (B) invest an additional amount equal to at least fifteen percent of such net profits distribution into qualified businesses which additional amount shall come from a separate pool of venture capital that is controlled by the certified capital company but that does not contain certified capital. In making investments from funds established under this paragraph, the certified capital company shall follow the requirements set forth in subparagraph (D) of paragraph one of subdivision (c) of this section pertaining to obtaining approval of the investment being in a qualified business, except that requirements pertaining to empire zones and underserved areas requirements shall not apply. Once qualified investments in qualified businesses have been made pursuant to this paragraph equal to thirty percent of the net profits on qualified investments, then the requirements under this subdivision shall have been satisfied and the proceeds from such qualified businesses may be distributed without restriction.

(e) Decertification. (1) The superintendent shall conduct an annual review of each certified capital company to determine if the certified capital company is abiding by the requirements of certification, to advise the certified capital company as to the eligibility status of its qualified investments, and to ensure that no investment has been made in violation of this subdivision. The cost of the annual review shall be paid by each certified capital company according to a reasonable fee schedule adopted by the superintendent.

(2) Any material violation of subdivision (c) of this section with respect to a particular certified capital company program shall be grounds for decertification of the certified capital company with respect to such program. If the superintendent determines that a certified capital company is not in compliance with the requirements of subdivision (c) of this section with respect to a particular certified capital company program, it shall, by written notice, inform the officers of the certified capital company that the certified capital company will be subject to decertification with respect to such program in one hundred twenty days from the date of mailing of the notice, unless the deficiencies are corrected and the certified capital company is again in compliance with all requirements for certification.

(3) At the end of the one hundred twenty day grace period, if the certified capital company is still not in compliance with subdivision (c) of this section with respect to a particular certified capital company program, the superintendent shall send a notice of decertification to the certified capital company with respect to such program and to all other appropriate state agencies.

(4) Notwithstanding the provisions of paragraphs two and three of this subdivision, if a certified capital company in certified capital company programs three, four and five fails to satisfy the requirement in subparagraph (B) of paragraph one of subdivision (c) of this section because it has been unable to make a sufficient amount of qualified investments in qualified businesses located either in empire zones established pursuant to article eighteen-B of the general municipal law or in underserved areas outside such empire zones, such certified capital company shall not be subject to decertification at that time. However, if such certified capital company fails to satisfy the requirement in subparagraph (C) of paragraph one of subdivision (c) of this section because it has been unable to make a sufficient amount of qualified investments in qualified businesses located either in such empire zones or in underserved areas outside such empire zones, but certifies to the superintendent that it had made a good faith effort to make such investments, such certified capital company shall be allowed two additional years to satisfy the requirement in such subparagraph (C). If, after the conclusion of such two year period, the certified capital company still has not been able to satisfy the requirement to make such investments, and such certified capital company certifies to the superintendent that it had made a good faith effort to make such investments, the requirement in paragraphs three, four and five of subdivision (h) of this section to make qualified investments in qualified businesses located in empire zones or in underserved areas shall be waived. Such certified capital company shall then be allowed one additional year to satisfy the requirement in such subparagraph (C), and if, at the conclusion of that additional one year period, such requirement is still not satisfied, such certified capital company shall be subject to decertification and the provisions of paragraphs two and three of this subdivision shall apply.

(5) Once a certified capital company has invested an amount cumulatively equal to one hundred percent of its certified capital with respect to a particular certified capital company program in qualified investments and has met all other requirements under this subdivision, the certified capital company shall no longer be subject to regulation by the superintendent and shall no longer be subject to the requirements of subdivision (c) of this section with respect to such program. Upon receiving documented certification by a certified capital company that it has invested an amount equal to one hundred percent of its certified capital, the department shall have sixty days to notify such certified capital company that it has or has not met such requirement with a reason for such determination if it has not, in the judgment of the department, met such requirement. If the department does not provide such notification within sixty days, the certified capital company shall then be deemed to have met such requirement.

(6) The superintendent shall send written notice of such decertification to the address of each certified investor whose tax credit has been subject to recapture or forfeiture, using the address shown on the last filing submitted to the superintendent.

(f) Revocation of certification. The superintendent may revoke the certification of a certified capital company, or, at the discretion of the superintendent, the certification of a certified capital company with respect to a particular certified capital company program only, if any material representation to the superintendent in connection with the application process proves to have been falsely made or if the application materially violates any requirement established by the superintendent pursuant to this subdivision. In addition, the superintendent may revoke the certification of a certified capital company if such certified capital company (i) falsely certified, pursuant to paragraph three of subdivision (d) of this section that a good faith effort was made to make additional qualifying investments under the requirements of paragraph three of subdivision (h) of this section, or (ii) falsely certified, pursuant to paragraph four of subdivision (e) of this section, that it had made a good faith effort to make a sufficient amount of qualifying investments in qualifying businesses located in empire zones established pursuant to article eighteen-B of the general municipal law or in underserved areas outside such empire zones.

(g) Registration requirements. All investments for which tax credits are allowable under the provisions of subdivision (k) of section fifteen hundred eleven of this chapter shall satisfy the conditions of being registered or specifically exempt from registration by provisions or regulations under sections three hundred fifty-nine-e through three hundred fifty-nine-ff of the general business law.

(h) Maximum permitted credits. (1) Certified capital company program one. The aggregate amount of certified capital for which taxpayers may be allocated and allowed tax credits pursuant to this paragraph and subdivision (k) of section fifteen hundred eleven of this chapter may not exceed fifty million dollars for calendar year nineteen hundred ninety-nine, which certified capital may be invested in certified capital companies beginning in calendar year nineteen hundred ninety-eight. In calendar year two thousand or thereafter, tax credits may be allowed pursuant to this paragraph and such subdivision (k) for an additional fifty million dollars of certified capital, which certified capital may be invested in certified capital companies beginning in calendar year nineteen hundred ninety-nine, if not allocated to calendar year nineteen hundred ninety-eight in accordance with this paragraph. Therefore, the total amount of certified capital for which tax credits may be allowed pursuant to this paragraph and such subdivision (k) shall be one hundred million dollars.

During any calendar year in which the limitation described in this paragraph will limit the amount of certified capital, certified capital will be allocated in order of priority based upon the date of filing of information described in subparagraph (A) of paragraph six of subdivision (c) of this section. Certified capital limited in any calendar year by the application of the provisions of this paragraph shall be allowed and allocated in the immediately succeeding calendar year in order of priority set forth in this paragraph. The superintendent shall advise any certified capital company in writing within fifteen days after receiving such filing, whether the limitations of this paragraph then in effect will be applicable with respect to the investments and credits described in such filing with the superintendent.

Certified capital may be raised by each certified capital company with respect to certified capital company program one at any time subsequent to its certification date, and credits shall be allocated to and vested in certified investors at the time of each such investment as provided in this paragraph, although such credits shall not be first allowed or incurred for state tax purposes, until, at the earliest, tax years beginning in nineteen hundred ninety-nine with respect to the first fifty million dollars of credits and tax years beginning in two thousand with respect to the next such fifty million dollars of credits.

(2) Certified capital company program two. The aggregate amount of certified capital for which taxpayers may be allocated and allowed tax credits pursuant to this paragraph and subdivision (k) of section fifteen hundred eleven of this chapter may not exceed thirty million dollars for calendar year two thousand one, which certified capital may be invested in certified capital companies beginning in calendar year nineteen hundred ninety-nine.

During any calendar year in which the limitation described in this paragraph will limit the amount of certified capital, certified capital will be allocated in order of priority based upon the date of filing of information described in subparagraph (A) of paragraph six of subdivision (c) of this section. The superintendent shall advise any certified capital company in writing, within fifteen days after receiving such filing, whether the limitations of this paragraph then in effect will be applicable with respect to the investments and credits described in such filing with the superintendent.

Certified capital may be raised by each certified capital company with respect to certified capital company program two at any time subsequent to its certification date, and credits shall be allocated to and vested in certified investors at the time of each such investment as provided in this paragraph, although such credits shall not be first allowed or incurred for state tax purposes, until, at the earliest, tax years beginning in two thousand one.

(3) Certified capital company program three. The aggregate amount of certified capital for which taxpayers may be allocated and allowed tax credits pursuant to this paragraph and subdivision (k) of section fifteen hundred eleven of this chapter may not exceed one hundred fifty million dollars for calendar year two thousand two, which certified capital may be invested in certified capital companies beginning in calendar year two thousand.

During any calendar year in which the limitation described in this paragraph will limit the amount of certified capital, certified capital will be allocated in order of priority based upon the date of filing of information described in subparagraph (A) of paragraph six of subdivision (c) of this section. The superintendent shall advise any certified capital company in writing, within fifteen days after receiving such filing, whether the limitations of this paragraph then in effect will be applicable with respect to the investments and credits described in such filing with the superintendent.

Certified capital may be raised by each certified capital company with respect to certified capital company program three at any time subsequent to its certification date, and credits shall be allocated to and vested in certified investors at the time of each such investment as provided in this paragraph, although such credits shall not be first allowed or incurred for state tax purposes, until, at the earliest, tax years beginning in two thousand two. One-third of the certified capital raised by each certified capital company with respect to certified capital company program three shall be used to make qualified investments in qualified businesses located in empire zones established pursuant to article eighteen-B of the general municipal law, and one-third of such certified capital shall be used to make qualified investments in qualified businesses located in underserved areas outside such empire zones.

(4) Certified capital company program four. The aggregate amount of certified capital for which taxpayers may be allocated and allowed tax credits pursuant to this paragraph and subdivision (k) of section fifteen hundred eleven of this chapter may not exceed sixty million dollars for calendar year two thousand six, which certified capital may be invested in certified capital companies beginning in calendar year two thousand four.

During any calendar year in which the limitation described in this paragraph will limit the amount of certified capital, certified capital will be allocated in order of priority based upon the date of filing of information described in subparagraph (A) of paragraph six of subdivision (c) of this section. The superintendent shall advise any certified capital company in writing, within fifteen days after receiving such filing, whether the limitations of this paragraph then in effect will be applicable with respect to the investments and credits described in such filing with the superintendent.

Certified capital may be raised by each certified capital company with respect to certified capital company program four at any time subsequent to its certification date, and credits shall be allocated to and vested in certified investors at the time of each such investment as provided in this paragraph, although such credits shall not be first allowed or incurred for state tax purposes, until, at the earliest, tax years beginning in two thousand six. One-third of the certified capital raised by each certified capital company with respect to certified capital company program four shall be used to make qualified investments in qualified businesses located in empire zones established pursuant to article eighteen-B of the general municipal law, and one-third of such certified capital shall be used to make qualified investments in qualified businesses located in underserved areas outside such empire zones, provided, however, that in the case of an investment made by a certified capital company in an empire zone located in an underserved area, the certified capital company making such an investment may choose to designate such investment as an investment in an underserved area but not as an investment in an empire zone for the purpose of meeting the requirements of this paragraph. Fifty percent of the total amount of capital invested by a certified capital company at the time of one hundred percent investment of funds shall be invested in qualified businesses that are involved in commerce for the primary purpose of developing and manufacturing products and systems covered by the activities set forth in paragraph (b) of subdivision one of section thirty-one hundred two-e of the public authorities law and have a ratio of research and development expenditures to net sales which equals or exceeds six percent during the fiscal year immediately preceding the qualified investment.

(5) Certified capital company program five. The aggregate amount of certified capital for which taxpayers may be allocated and allowed tax credits pursuant to this paragraph and subdivision (k) of section fifteen hundred eleven of this chapter may not exceed sixty million dollars for calendar year two thousand seven, which certified capital may be invested in certified capital companies beginning in calendar year two thousand five.

During any calendar year in which the limitation described in this paragraph will limit the amount of certified capital, certified capital will be allocated in order of priority based upon the date of filing of information described in subparagraph (A) of paragraph six of subdivision (c) of this section. The superintendent shall advise any certified capital company in writing, within fifteen days after receiving such filing, whether the limitations of this paragraph then in effect will be applicable with respect to the investments and credits described in such filing with the superintendent.

Certified capital may be raised by each certified capital company with respect to certified capital company program five at any time subsequent to its certification date, and credits shall be allocated to and vested in certified investors at the time of each such investment as provided in this paragraph, although such credits shall not be first allowed or incurred for state tax purposes, until, at the earliest, tax years beginning in two thousand seven. One-third of the certified capital raised by each certified capital company with respect to certified capital company program five shall be used to make qualified investments in qualified businesses located in empire zones established pursuant to article eighteen-B of the general municipal law, and one-third of such certified capital shall be used to make qualified investments in qualified businesses located in underserved areas outside such empire zones, provided, however, that in the case of an investment made by a certified capital company in an empire zone located in an underserved area, the certified capital company making such an investment may chose to designate such investment as an investment in an underserved area but not as an investment in an empire zone for the purpose of meeting the requirements of this paragraph. Fifty percent of the total amount of capital invested by a certified capital company at the time of one hundred percent investment of funds shall be invested in qualified businesses that are involved in commerce for the primary purpose of developing and manufacturing products and systems covered by the activities set forth in paragraph (b) of subdivision one of section thirty-one hundred two-e of the public authorities law and have a ratio of research and development expenditures to net sales which equals or exceeds six percent during the fiscal year immediately preceding the qualified investment.

(i) Maximum certified capital. The maximum amount of certified capital per certified capital company program invested in one or more certified capital companies allowed in any one year to any one certified investor shall not exceed ten million dollars for certified capital company programs one and three, and eight million dollars for certified capital company programs two, four and five for such year, provided, however, that if the aggregate amount of certified capital for such year, as set forth in subdivision (h) of this section, has not been reached sixty days prior to the end of the year to which such aggregate amount applies, the provisions of this subdivision shall cease to apply for the remainder of such year. In addition, the aggregate amount of tax credits allowed in any taxable year to any affiliated group of taxpayers in relation to certified capital may not exceed such maximum amount, whether or not such taxpayers file a combined return pursuant to subdivision (f) of section fifteen hundred fifteen of this chapter. For purposes of the preceding sentence, the term "affiliated group" shall have the same meaning as described in section 1504 of the internal revenue code, except that the references to "at least eighty percent" in such section 1504 shall be read as "more than fifty percent".

(k) Rules and regulations. The superintendent, in consultation with the department of taxation and finance, shall prescribe such rules and regulations as he or she shall deem necessary in order to implement the provisions of this section within one hundred twenty days of the effective date of this section.

(l) For the purposes of this section, the term "empire zone" shall also include, in relation to investments made by a certified capital company in which at least fifty percent of the voting stock, capital, and membership interests, as the case may be, are owned by an entity that is managed directly or indirectly, by a non-profit corporation, the liberty zone as defined in section one of part AA of chapter three hundred eighty-three of the laws of two thousand one, the resurgence zone as defined in section one of part A of chapter three hundred eighty-three of the laws of two thousand one and a federal empowerment zone designated pursuant to section 1391 of the internal revenue code.

Section 12. Internet; advertising, vendor status, nexus.

(a) For purposes of subdivision (b) of this section, the term "person" shall mean a corporation, joint stock company or association, insurance corporation, or banking corporation, as such terms are defined in section one hundred eighty-three, one hundred eighty-four, or one hundred eighty-six, or in article nine-A, thirty-two or thirty-three of this chapter, imposing tax on such entities.

(b) No person shall be subject to the taxes imposed under section one hundred eighty-three, one hundred eighty-four or one hundred eighty-six, or article nine-A, thirty-two or thirty-three of this chapter, solely by reason of (1) having its advertising stored on a server or other computer equipment located in this state (other than a server or other computer equipment owned or leased by such person), or (2) having its advertising disseminated or displayed on the Internet by an individual or entity subject to tax under section one hundred eighty-three, one hundred eighty-four or one hundred eighty-six, or article nine-A, twenty-two, thirty-two or thirty-three of this chapter.

(c) A person, as such term is defined in subdivision (a) of section eleven hundred one of this chapter, shall not be deemed to be a vendor, for purposes of article twenty-eight of this chapter, solely by reason of (1) having its advertising stored on a server or other computer equipment located in this state (other than a server or other computer equipment owned or leased by such person), or (2) having its advertising disseminated or displayed on the Internet by an individual or entity subject to tax under section one hundred eighty-three, one hundred eighty-four or one hundred eighty-six, or article nine-A, twenty-two, thirty-two or thirty-three of this chapter.

(d)(i) Except as provided in clause (B) of subparagraph (ii) of paragraph eight of subdivision (b) of section eleven hundred one of this chapter, a person selling telecommunication services or an Internet access service shall not be deemed to be a vendor, for purposes of article twenty-eight or twenty-nine of this chapter, of tangible personal property or services sold by the purchaser of such telecommunication services or Internet access service solely because such purchaser uses such telecommunication services or Internet access service as a means to sell such tangible personal property or services.

(ii) For purposes of this subdivision, the term "person" shall refer to any person within the meaning prescribed in either paragraph (c) of subdivision one of section one hundred eighty-six-e of this chapter or subdivision (a) of section eleven hundred one of this chapter, the term "telecommunication services" shall have the meaning prescribed in paragraph (g) of subdivision one of section one hundred eighty-six-e of this chapter, and the term "Internet access service" shall have the meaning prescribed in subdivision (v) of section eleven hundred fifteen of this chapter.

Section 13. (Enacted without section heading)

(a) Exemption from taxation for victims or targets of Nazi persecution. Notwithstanding any provision of law to the contrary, amounts received (including accumulated interest) by victims or targets of Nazi persecution from an eligible settlement fund, or from an eligible grantor trust established for the benefit of such victims or targets as set forth in this section, whether or not includable in income for federal income tax purposes, shall be exempt from all state and local taxes imposed on or measured by income. Provided however, that this exemption shall not apply to amounts received from assets acquired with such assets or with the proceeds from the sale of such assets. For the purposes of this section, "victims or targets of Nazi persecution" means any individual, corporation, partnership, sole proprietorship, unincorporated association, community, congregation, group, organization, or other entity persecuted or targeted for persecution by the Nazi Regime because of race, religion, ethnicity, sexual orientation, national origin, or physical or mental disability or handicap, or the heirs, successors, administrators, executors, affiliates, or assignees of such victims or targets, or any other claimant receiving funds from an eligible settlement fund, or from an eligible grantor trust established for the benefit of such victims or targets. An eligible settlement fund is an entity that is treated for federal income tax purposes as a designated or qualified settlement fund, as such term is defined in section 468B of the internal revenue code and the regulations thereunder, which is established for the principal purpose of resolving and satisfying claims arising from or in connection with any act or omission in any way relating to the Holocaust, World War II and its prelude and aftermath, victims or targets of Nazi persecution, transactions with or actions of the Nazi Regime, or treatment of refugees fleeing Nazi persecution by or in the Swiss Confederation. An eligible grantor trust is a grantor trust which is established for the principal purpose of resolving and satisfying such claims.

(b) Exemption from taxation for qualified settlement funds established for the benefit of victims or targets of Nazi persecution by or in the Swiss Confederation. Notwithstanding any other provision of law to the contrary, an entity that is treated for federal income tax purposes as a designated or qualified settlement fund, as such term is defined in section 468B of the internal revenue code and the regulations thereunder, or a grantor trust, either of which is established for the principal purpose of resolving and satisfying claims arising from or in connection with any act or omission in any way relating to the Holocaust, World War II and its prelude and aftermath, victims or targets of Nazi persecution, transactions with or actions of the Nazi Regime, treatment of refugees fleeing Nazi persecution, by or in the Swiss Confederation, shall be exempt from all taxes imposed on or measured by income, the commercial rent tax imposed by the city of New York and all sales and use taxes whether imposed by the State or any local jurisdiction or municipality.