The New York State Department of Taxation and Finance released guidance in the form of tax return instructions addressing how it will account for global intangible low-taxed income (referred to as GILTI) for apportionment purposes. These instructions allow a taxpayer to include its net GILTI amount (rather than the total receipts related to the generation of GILTI) in the denominator of its apportionment factor, but do not require a taxpayer to include any amount related to GILTI in its numerator.


The Federal Tax Cuts and Jobs Act (TCJA) created a new category of income known as GILTI under Internal Revenue Code (IRC) section 951A. This provision imposes a tax on U.S. shareholders based on income from controlled foreign corporations (CFCs), to the extent that this income is in excess of a nominal 10% return on the CFCs’ tangible assets. GILTI is taxed at the regular federal tax rates, but a deduction is generally allowed for 50% of the amount of GILTI included in a taxpayer’s federal gross income under IRC section 250(a)(1)(B). Additionally, foreign tax credits are available to offset the federal income tax imposed on GILTI, with credits limited to 80% of the amount of foreign taxes paid.

New York State’s Treatment of GILTI

In April 2018, New York passed legislation responding to some provisions of the TCJA, but did not address GILTI. As a result, both GILTI and the 50% GILTI deduction are included in the computation of New York taxable income due to New York’s general conformity to federal taxable income. While legislation to decouple from the federal treatment of GILTI was introduced and passed in the New York State Senate in June 2018, it did not pass in the New York State Assembly (see our previous legal alert:

Last month, Scott Palladino, Assistant Deputy Commissioner for Tax Policy Analysis at the Department, stated that the Department would provide “factor relief” to New York taxpayers that included GILTI in the computation of New York taxable income. The revised instructions for Forms CT-3 (General Business Corporation Franchise Tax Return) and CT-3-A (General Business Corporation Combined Franchise Tax Return) now include a brief paragraph stating that a taxpayer’s New York apportionment factor denominator includes taxable GILTI, less the 50% GILTI deduction allowed for federal tax purposes. Presumably because the Department agrees that GILTI represents income from non-US sources, it is not included in the apportionment factor numerator.

Eversheds Sutherland Observations

  • New York’s inclusion of a taxpayer’s net GILTI amount in the denominator of the apportionment factor only is similar to the approach taken by Maine, but differs from the approaches taken by other states. Indiana generally requires corporations to include the net GILTI amount in the denominator, but also requires Indiana-domiciled corporations to include the net GILTI amount in the numerator. The New Jersey Division of Taxation has instructed taxpayers to calculate taxable GILTI “based on a separate special accounting method,” whereby a taxpayer’s taxable net GILTI amount will be calculated using a separate allocation ratio “equal to the ratio of New Jersey’s gross domestic product (GDP) over the total GDP of every US state (and the District of Columbia) in which the taxpayer has economic nexus.” See our previous legal alert:
  • New York’s apportionment factor is generally based upon a calculation of a taxpayer’s New York receipts over its receipts everywhere. Including GILTI—rather than the receipts related to the generation of GILTI—is arguably inconsistent with the general principles underpinning New York’s apportionment factor, and may increase the amount of GILTI that is taxable by New York for certain taxpayers.
  • The instructions to Forms CT-3 and CT-3-A classify the inclusion of a taxpayer’s net GILTI amount in the apportionment factor denominator as a “discretionary adjustment” under New York Tax Law section 210-A.11. Those taxpayers significantly impacted by the inclusion of the net GILTI amount (rather than underlying receipts) in the apportionment factor denominator may want to consider a request for an alternative discretionary adjustment under section 210 A.11.