(1) the transaction isnot done for a valid business purpose, that is, one or more businesspurposes, other than obtaining tax benefits, that alone or in combinationconstitute the primary motivation for the transaction;

(2) the transaction doesnot have economic substance apart from its tax benefits; or

(3) the tax treatmentof the transaction is based upon an elevation of form over substance.

(1) General. A NewYork confidential transaction is a transaction that is offeredto a taxpayer under conditions of confidentiality and for which thetaxpayer has paid an advisor a fee. For purposes of this subdivision,related persons who bear a relationship to each other as describedin section 267(b) or section 707(b) of the Internal Revenue Code willbe treated as the same person.

(2) Conditions of confidentiality.A transaction is considered to be offered to a taxpayer under conditionsof confidentiality if the advisor who is paid the fee places a limitationon disclosure by the taxpayer of the tax treatment or tax structureof the transaction and the limitation on disclosure protects the confidentialityof that advisor's tax strategies. A transaction is treated asconfidential even if the conditions of confidentiality are not legallybinding on the taxpayer. A claim that a transaction is proprietaryor exclusive is not treated as a limitation on disclosure if the advisorconfirms to the taxpayer that there is no limitation on disclosureof the tax treatment or tax structure of the transaction.

(3) Determination ofadvisor fee. For purposes of this subdivision, a fee includes allfees for a tax strategy or for services for advice (whether or nottax advice) or for the implementation of a transaction. These feesinclude consideration in whatever form paid, whether in cash or inkind, for services to analyze the transaction (whether or not relatedto the tax consequences of the transaction), for services to implementthe transaction, for services to document the transaction, and forservices to prepare tax returns to the extent that the fees exceedthe fees customary for return preparation. For purposes of this subdivision,a taxpayer also is treated as paying fees to an advisor if the taxpayerknows or should know that the amount it pays will be paid indirectlyto the advisor, such as through a referral fee or fee-sharing arrangement.A fee does not include amounts paid to a person, including an advisor,in that person's capacity as a party to the transaction. Forexample, a fee does not include reasonable charges for the use ofcapital or the sale or use of property.

(1) General. A NewYork transaction with contractual protection is a transactionfor which the taxpayer or a related party (as described in section267[b] or section 707[b] of the Internal RevenueCode) has the right to a full or partial refund of fees (as describedin paragraph [2] of this subdivision) if all or part ofthe intended tax consequences from the transaction are not sustained.A transaction with contractual protection also is a transaction forwhich fees (as described in paragraph [2] of this subdivision)are contingent on the taxpayer's realization of tax benefitsfrom the transaction. All the facts and circumstances relating tothe transaction will be considered when determining whether a feeis refundable or contingent, including the right to reimbursementsof amounts that the parties to the transaction have not designatedas fees or any agreement to provide services without reasonable compensation.

(2) Fees. Paragraph (1)of this subdivision only applies with respect to fees paid by or onbehalf of the taxpayer or a related party to any person who makesor provides a statement, oral or written, to the taxpayer or relatedparty (or for whose benefit a statement is made or provided to thetaxpayer or related party) as to the potential tax consequences thatmay result from the transaction.

(3) Exceptions.

(1) General. A transactionwill not be considered a New York reportable transaction, or willbe excluded from any individual category of New York reportable transactionunder subdivisions (c) and (d) of this section, if the commissionermakes a determination by published guidance that the transaction isnot subject to the reporting requirements of this Part. The commissionermay also, upon request, make a determination under section 2500.6of this Part that a specific transaction or type of transaction isnot subject to the reporting requirements of this Part.

(2) Special rule forregulated investment companies. For purposes of this Part, a corporationwhich is a regulated investment company as defined in section 851of the Internal Revenue Code and subject to Federal income tax undersection 852 of the Internal Revenue Code or an investment vehiclethat is owned 95 percent or more by one or more regulated investmentcompanies at all times during the course of the transaction is notrequired to disclose a transaction that is described in subdivisions(c) and (d) of this section unless the transaction is also a New Yorklisted transaction.