§ 40. The tax-free NY area tax elimination credit. (a) Allowance of
credit. A taxpayer that is a business or owner of a business in the case
of a business taxed as a sole proprietorship, partnership or New York S
corporation, that is located in a tax-free NY area approved pursuant to
article twenty-one of the economic development law and is subject to tax
under article nine-A, or twenty-two of this chapter, shall be allowed a
credit against such tax, pursuant to the provisions referenced in
subdivision (e) of this section, to be computed as hereinafter provided.

(b) Amount of credit. The amount of the credit shall be the product
of: (1) the tax-free area allocation factor; and (2) the tax factor.

(c) Tax-free area allocation factor. The tax-free area allocation
factor shall be the percentage representing the business's economic
presence in the tax-free NY area in which the business was approved to
locate pursuant to article twenty-one of the economic development law.
This percentage shall be computed by:

(1) ascertaining the percentage that the average value of the
business's real and tangible personal property, whether owned or rented
to it, in the tax-free NY area in which the business was located during
the period covered by the taxpayer's report or return bears to the
average value of the business's real and tangible personal property,
whether owned or rented to it, within the state during such period;
provided that the term "value of the business's real and tangible
personal property" shall have the same meaning as such term has in
paragraph (a) of subdivision two of section two hundred nine-B of this
chapter; and

(2) ascertaining the percentage that the total wages, salaries and
other personal service compensation, similarly computed, during such
period of employees, except general executive officers, employed at the
business's location in the tax-free NY area, bears to the total wages,
salaries and other personal service compensation, similarly computed,
during such period, of all the business's employees within the state,
except general executive officers; and

(3) adding together the percentages so determined and dividing the
result by two.

For purposes of article twenty-two of this chapter, references in this
subdivision to property, wages, salaries and other personal service
compensation shall be deemed to be references to such items connected
with the conduct of a business.

(d) Tax factor. (1) General. The tax factor shall be, in the case of
article nine-A of this chapter, the largest of the amounts of tax
determined for the taxable year under paragraphs (a) through (d) of
subdivision one of section two hundred ten of such article after the
deduction of any other credits allowable under such article. The tax
factor shall be, in the case of article twenty-two of this chapter, the
tax determined for the taxable year under subsections (a) through (d) of
section six hundred one of such article after the deduction of any other
credits allowable under such article.

(2) Sole proprietors, partners and S corporation shareholders. (A)
Where the taxpayer is a sole proprietor of a business located in a
tax-free NY area, the taxpayer's tax factor shall be that portion of the
amount determined in paragraph one of this subdivision that is
attributable to the income of the business at its location in the
tax-free NY area. Such attribution shall be made in accordance with the
ratio of the taxpayer's income from such business allocated within the
state, entering into New York adjusted gross income, to the taxpayer's
New York adjusted gross income, or in accordance with such other methods
as the commissioner may prescribe as providing an apportionment that
reasonably reflects the portion of the taxpayer's tax attributable to
the income of such business. In no event may the ratio so determined
exceed 1.0. The income from such business allocated within the state
shall be determined as if the sole proprietor was a non-resident.

(B)(i) Where the taxpayer is a member of a partnership that is a
business located in a tax-free NY area, the taxpayer's tax factor shall
be that portion of the amount determined in paragraph one of this
subdivision that is attributable to the income of the partnership. Such
attribution shall be made in accordance with the ratio of the partner's
income from the partnership allocated within the state to the partner's
entire income, or in accordance with such other methods as the
commissioner may prescribe as providing an apportionment that reasonably
reflects the portion of the partner's tax attributable to the income of
the partnership. In no event may the ratio so determined exceed 1.0. The
income from the partnership allocated within the state shall be
determined as if any of the partners was a non-resident.

(ii) For purposes of article nine-A of this chapter, the term
"partner's income from the partnership" means partnership items of
income, gain, loss and deduction, and New York modifications thereto,
entering into business income and the term "partner's entire income"
means business income, allocated within the state. For purposes of
article twenty-two of this chapter, the term "partner's income from the
partnership" means partnership items of income, gain, loss and
deduction, and New York modifications thereto, entering into New York
adjusted gross income, and the term "partner's entire income" means New
York adjusted gross income.

(C) (i) Where the taxpayer is a shareholder of a New York S
corporation that is a business located in a tax-free NY area, the
shareholder's tax factor shall be that portion of the amount determined
in paragraph one of this subdivision that is attributable to the income
of the S corporation. Such attribution shall be made in accordance with
the ratio of the shareholder's income from the S corporation allocated
within the state, entering into New York adjusted gross income, to the
shareholder's New York adjusted gross income, or in accordance with such
other methods as the commissioner may prescribe as providing an
apportionment that reasonably reflects the portion of the shareholder's
tax attributable to the income of such business. The income of the S
corporation allocated within the state shall be determined by
multiplying the income of the S corporation by a business allocation
factor that shall be determined in clause (ii) of this subparagraph. In
no event may the ratio so determined exceed 1.0.

(ii) The business allocation factor for purposes of this subparagraph
shall be computed by adding together the property factor specified in
subclause (I) of this clause, the wage factor specified in subclause
(II) of this clause and the apportionment factor determined under
section two hundred ten-A of this chapter and dividing by three.

(I) The property factor shall be determined by ascertaining the
percentage that the average value of the business's real and tangible
personal property, whether owned or rented to it, within the state
during the period covered by the taxpayer's report or return bears to
the average value of the business's real and tangible personal property,
whether owned or rented to it, within and without the state during such
period; provided that the term "value of the business's real and
tangible personal property" shall have the same meaning as such term has
in paragraph (a) of subdivision two of section two hundred nine-B of
this chapter.

(II) The wage factor shall be determined by ascertaining the
percentage that the total wages, salaries and other personal service
compensation, similarly computed, during such period of employees,
except general executive officers, employed at the business's location
or locations within the state, bears to the total wages, salaries and
other personal service compensation, similarly computed, during such
period, of all the business's employees within and without the state,
except general executive officers.

(3) Combined returns or reports. (A) Where the taxpayer is a business
located in a tax-free NY area and is required or permitted to make a
return or report on a combined basis under article nine-A of this
chapter, the taxpayer's tax factor shall be the amount determined in
paragraph one of this subdivision that is attributable to the income of
such business. Such attribution shall be made in accordance with the
ratio of the business's income allocated within the state to the
combined group's income, or in accordance with such other methods as the
commissioner may prescribe as providing an apportionment that reasonably
reflects the portion of the combined group's tax attributable to the
income of such business. In no event may the ratio so determined exceed
1.0.

(B) The term "income of the business located in a tax-free NY area"
means business income calculated as if the taxpayer was filing
separately and the term "combined group's income" means business income
as shown on the combined report, allocated within the state.

(4) If a business is generating or receiving income from a line of
business or intangible property that was previously conducted, created
or developed by the business or a related person, as that term is
defined in section four hundred thirty-one of the economic development
law, the tax factor specified in this subdivision shall be adjusted to
disregard such income.

(e) Cross-references. For application of the credit provided for in
this section, see the following provisions of this chapter:

(1) Article 9-A: section 210-B, subdivision 41.

(2) Article 22: section 606, subsection (i), paragraph (1),
subparagraph (B), clause (xxxvi).

(3) Article 22: section 606, subsection (ww).