New York State Tax Rulings
Free plain-English summaries of state tax letter rulings and advisory opinions issued in New York, with full citations and the original source on every page.
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Is a Delaware business trust that is classified as a partnership for federal income tax purposes treated as a partnership, and not as a corporation, for New York Article 9-A franchise tax?
Yes -- it is treated as a partnership. Diversified Futures Trust I is a Delaware business trust that trades commodity futures, with a managing owner and public limited interestholders, and it qualifie…
In a combined Article 9-A report, must the parent still add back interest on debt used to acquire a subsidiary that is itself included in the combined group?
It is handled at two levels. When parent P and subsidiary S file a combined Article 9-A report, each must also file its own separate report. On P's separate report, P must make the section 208.9(b)(6)…
Is a section 4(c)(7) investment subsidiary, owned by a bank holding company but whose sole business is investing in securities for its own account, a banking corporation subject to Article 32?
No -- it is not a banking corporation, so it is taxed under Article 9-A, not Article 32. BT Investment Partners (BTIP) is indirectly wholly owned by Bankers Trust New York Corporation (a registered ba…
Are offshore investors that buy and sell U.S. securities through a New York investment adviser and custodian doing business in New York for Article 9-A, when the discretionary trading decisions are made outside the state?
No, they are not doing business in New York. Under the structure, a foreign subsidiary and a foreign unit trust would invest in U.S. stocks and bonds. The only New York activities are a custodian hold…
When goods originate in New Jersey, are sent to New York contractors for processing, and are returned to New Jersey, where are they located for the Article 9-A property factor?
They are located where they physically sit, with in-transit goods deemed at their destination. McNaughton's piece goods are cut in New Jersey, sent to sewing contractors in and out of New York, then r…
Does a bank subsidiary that elected to keep Article 9-A treatment lose that election when the FDIC sells the parent bank's stock in a transaction treated as a deemed asset sale?
No -- the election survives. Corporation X is a subsidiary of an Article 32 bank that made a proper one-time election under 20 NYCRR 16-2.5(j)(3) to continue being taxed under Article 9-A. When the FD…
Is a new telephone-service provider a first- or second-class utility under section 186-a, and is it taxed under Article 9 (sections 183/184) or Article 9-A?
It starts under Article 9-A and may shift to Article 9. RCN of New York, a new provider of local and long-distance telephone service over leased cable lines, is subject to Article 9-A franchise tax fr…
Are storage fees paid at a public warehouse, charged per carton per day with no formal lease, gross rents that must be capitalized at eight times and included in the Article 9-A property factor?
Yes. Corporation A stores inventory in public warehouses, paying on a per-carton, per-day basis with no formal lease. Under 20 NYCRR 4-3.2, real property rented to a taxpayer is included in the proper…
For Article 9-A, can a corporation's loan to a partnership be classified as investment capital, with the interest treated as investment income?
No. Friendly Home Parties, a New York S corporation, made a $3.5 million demand loan to a partnership (owned by individuals who hold 70% of the corporation) and receives 7% interest, taking back an in…
Are SEC insider-trading disgorgement funds -- like the Boesky, Siegal, and Kidder Peabody funds -- subject to New York corporate franchise tax under Article 9-A or personal income tax under Article 22, and are the individual claimants or original defendants separately taxed on the funds' earnings?
No entity-level New York tax applies to the Disgorgement Funds themselves. Because the receiver merely holds court-restricted investments and distributes them under an SEC-approved plan with no discre…
How does a cooperative housing corporation value the real property it owns for purposes of the Article 9-A capital base?
At fair market value -- but the actual value is a factual question. For the Article 9-A capital base, a cooperative housing corporation (defined in IRC section 216) is taxed under section 210.1(b) at …
How does a cooperative housing corporation determine the fair market value of its real property for the Article 9-A capital base when only the assessed valuation is known?
By fair market value -- which is a factual determination, not simply the assessed value. For the Article 9-A capital base, a cooperative housing corporation (IRC section 216) is taxed under section 21…
Is the New York net operating loss deduction limited to the amount of the federal net operating loss deduction, and does that limitation require adjustments when assets are later disposed of?
Yes -- the New York net operating loss deduction is capped at the federal amount. Under section 208.9(f), the New York NOL for a loss year is computed under section 208.9(f)(1), but the deduction actu…
Is an unincorporated condominium association that only collects common charges and bank interest, owns no property, and is not engaged in business subject to the Article 9-A franchise tax?
Yes. The 440 East 6 Condominium is an unincorporated condominium association formed under Article 9-B of the Real Property Law to manage the common elements; its income is only common charges from its…
Is thin capitalization tested on a book or fair market value basis, and is interest on a loan used to fund a distribution exceeding shareholder equity deductible for Article 9-A?
Thin capitalization is tested on a fair market value basis, not a book basis. Indopco borrowed $700 million from a brother/sister corporation to pay a dividend to its parent when its book capital was …
Does a plant and equipment used to convert liquid cryogens into compressed gas qualify for the Article 9-A investment tax credit?
Yes, if the other tests are met. A company that buys liquid cryogens, converts them into vapor with pumps, vaporizers, and compressors, and bottles the gas in high-pressure cylinders for sale is engag…
How is income from servicing extended warranty contracts allocated to New York for the Article 9-A receipts factor?
Receipts from servicing extended warranty contracts are 'other business receipts' under 20 NYCRR 4-4.1(b)(5), and they are allocated to New York when they are earned in New York -- that is, where the …
Are sales to a New York customer, drop-shipped to the customer's out-of-state buyers, New York receipts for the business allocation percentage?
It depends on where the goods are shipped, not who the customer is. For the receipts factor of the Article 9-A business allocation percentage, receipts from sales of tangible personal property are all…
Is a New York corporation owned by tribal members and operating entirely on an Indian reservation exempt from Article 9-A franchise tax?
No. A New York domestic corporation that runs a bingo operation entirely on the St. Regis Mohawk Reservation and is owned entirely by tribal members is still subject to the Article 9-A franchise tax. …
Is a corporation dissolved by proclamation in 1981, holding only real property as nominee for others, subject to Article 9-A franchise tax?
Two periods, two answers. For the taxable years while the corporation was incorporated (here, the years ended February 28, 1978 through September 30, 1981), it owes the Article 9-A franchise tax under…
Does a for-profit art college's photography, film, and computer equipment qualify for the Article 9-A investment tax credit?
No. A for-profit college of visual arts cannot claim the Article 9-A investment tax credit on its photography, film, video, and computer-graphics equipment. The credit under Tax Law section 210.12 is …
Is a Section 468B escrow settlement fund subject to New York franchise or personal income tax, and will New York waive penalties as the IRS did?
No tax is due, and the penalty question is moot. The SEC v. Vaskevitch escrow fund, treated as a qualified settlement fund under Section 468B, is not subject to New York franchise tax or New York Stat…
Is a Section 468B qualified settlement fund subject to tax under Article 9-A or Article 22 of the New York Tax Law?
No. A qualified settlement fund under Section 468B of the Internal Revenue Code is not subject to tax under either Article 9-A or Article 22 of the New York Tax Law -- even where the defendant, the fu…
Is a $100 million Section 468B civil claims settlement fund subject to New York franchise tax or New York State and City personal income tax, and what must it file?
No tax, no return. The Salomon civil claims fund -- a $100 million settlement fund created by federal court order and treated as a qualified settlement fund under Section 468B -- is not subject to New…
Does reincorporating a New York corporation in Delaware by merger trigger New York tax, and how many franchise tax reports are required?
Reincorporating a New York corporation as a Delaware corporation by statutory merger -- a mere change in form qualifying as a tax-free reorganization under IRC section 368(a)(1)(F) -- is also tax-free…
Is the income of a court-approved Section 468B qualified settlement fund subject to New York franchise tax or New York State and City personal income tax?
No. A designated settlement fund that is a qualified settlement fund under Section 468B of the Internal Revenue Code is not subject to New York franchise tax or to New York State or City personal inco…
In computing the eligible business facility credit, can wages of employees at a separate, non-qualified branch be counted as eligible wages?
No. For the eligible business facility credit under Tax Law section 210.11, only the wages of employees serving in jobs created or retained at the certified eligible business facility count as eligibl…
Does a foreign manufacturer's in-state technical advice exceed the protection of Public Law 86-272 and subject it to Article 9-A?
It depends on timing. A foreign (out-of-state) manufacturer that ships tangible personal property into New York is protected from the Article 9-A franchise tax by Public Law 86-272 if its New York act…
Does transferring a division's assets to a subsidiary in a Section 351/368 reorganization trigger investment tax credit recapture or forfeit the credit carryover?
No recapture, and the carryover survives. Transferring all of a division's assets to a wholly owned subsidiary in a tax-free transaction under IRC sections 351, 368, and 381(a) -- where the property s…
Does a machine used to rebuild torque converters qualify for the sales tax production exemption and the Article 9-A investment tax credit?
Yes, both. Rebuilding worn torque converters -- cutting open the old unit, replacing worn parts, and reassembling and testing a finished converter -- is the production of goods by manufacturing or pro…
Does machinery used to cut, tie, and close meat casings for meat companies qualify for the Article 9-A investment tax credit?
Yes, if the use tests are met. A company that takes reel stock of cellulose or fibrous casings, cuts it to length, drills holes, and clips, ties, and closes the casings for meat companies is engaged i…
Is a health maintenance organization licensed under Article 44 of the Public Health Law an insurance corporation taxable under Article 33?
No. A health maintenance organization licensed under Article 44 of the Public Health Law is not an insurance corporation for franchise tax purposes and is not taxable under Article 33. As long as the …
Is a foreign sales corporation organized in a U.S. possession subject to New York franchise tax, and is its exempt foreign trade income excluded for New York?
A foreign sales corporation (FSC) organized in a U.S. possession (here, the Northern Mariana Islands) is a foreign -- but not an alien -- corporation for Article 9-A, because a U.S. possession is not …
Is a company whose only district activity beyond solicitation is maintaining an office subject to the metropolitan transportation business tax surcharge?
Yes. A company that maintains an office in the metropolitan commuter transportation district (MCTD) is subject to the metropolitan transportation business tax surcharge under Tax Law section 209-B, ev…
May a New York parent file a combined Article 9-A report with its wholly owned foreign sales corporation subsidiary organized in a U.S. possession?
Possibly -- it is up to the Commissioner. A foreign sales corporation organized in the U.S. Virgin Islands is a foreign but not an alien corporation, because a U.S. possession is not a foreign country…
Is a bank holding company subsidiary a banking corporation taxable under Article 32, or is it taxed under Article 9-A?
Not necessarily a banking corporation. A corporation 65 percent or more owned or controlled by a bank holding company is a 'banking corporation' subject to Article 32 only if it is also principally en…
Is the Agent Orange Settlement Fund subject to New York franchise tax under Article 9-A or personal income tax under Article 22?
No. The Agent Orange Settlement Fund is not subject to New York franchise tax under Article 9-A or personal income tax under Article 22. The IRS ruled that the Fund -- established before the effective…
For a multi-tier chain of controlled foreign corporations, does a company's share of a lower-tier CFC's Subpart F income keep the character (subsidiary capital vs. investment income) of the company's OWNERSHIP IN THAT LOWER-TIER CFC, or does it instead take on the character of the company's ownership in the FIRST-TIER CFC through which the income is deemed distributed?
The company's pro-rata share of Subpart F income from ANY tier of controlled foreign corporation -- first-tier or lower -- is deemed a dividend paid up the chain and takes on the character of the taxp…
Are municipal put bonds investment capital, and how does the put date affect their classification under Article 9-A?
A municipal put bond's put date counts as a 'date of maturity' under 20 NYCRR 3-4.2. So the bond is generally classified as investment capital, except that it must be classified as cash (not investmen…
Is a dissolved corporation that merely holds record title to New York real property as nominee for others, while otherwise inactive, subject to Article 9-A franchise tax?
It depends on whether the corporation was still incorporated. Midstate Research was a New York corporation that owned four acres of vacant land but stopped all activity in 1971 and was dissolved by pr…
May a new business get a refund of its unused Article 9-A investment tax credit under section 210.12(j), and for which year must the refund claim be filed?
Yes -- a qualifying new business can have its unused investment tax credit refunded, with conditions. NEWCO, a manufacturer incorporated in 1984 that met the section 210.12(j) new-business tests, may …
Are payments by a corporation to independent sales corporations excluded from both the numerator and denominator of its Article 9-A payroll factor?
Yes -- payments to genuinely independent sales corporations are left out of the payroll factor entirely. Generra, an out-of-state apparel company with New York nexus, markets through three independent…
Is a shareholder personally required to file the corporation's franchise tax report, or personally liable for the corporation's unpaid franchise tax and penalties?
No on both counts. The franchise tax report obligation under section 211.1 falls on the corporation (the 'taxpayer' defined in section 208.2), not on its individual shareholders. So a shareholder is n…
For a company that books trips and tours, what share of its service receipts is allocated to New York for the Article 9-A receipts factor when the booking agents are in New York but the back office is elsewhere?
All of it -- 100% of the service receipts are allocated to New York. For a company that 'books' trips and tours, the receipts come from services, and under 20 NYCRR 4-4.3 service receipts are allocate…
Is a corporation that filed a 'final' return and stopped operating, but was never formally dissolved, still subject to Article 9-A franchise tax for the years it remained incorporated?
Yes -- it owes franchise tax for all those years. Vi-Toria Building Corp. filed a 'final' return for 1980, stopped collecting rents, signing leases, and paying bills, and the owner's heir managed the …
Is a condominium association that only collects common charges and reserve-fund interest -- with no rental or business income -- subject to New York's Article 9-A corporate franchise tax?
It depends on the year. For 1986 through 1988, no -- the Larkfield Professional Center Condo Association, an unincorporated Real Property Law Article 9-B condominium association whose only income was …
If a bank subsidiary revokes its election to be taxed under Article 9-A (switching to Article 32) in the same year it has a big capital loss, can it still carry that loss back to earlier years when it was an Article 9-A taxpayer?
Yes, but conditions apply. FSB-Properties, a wholly owned subsidiary of Flushing Savings Bank, qualifies as a banking corporation but had elected to be taxed under Article 9-A instead of Article 32. F…
If a payroll-tax-filing service pools client funds meant for the IRS and state/local tax authorities and invests them before the taxes are due, is the investment income taxable New York investment income or ordinary business income?
Mostly yes, it can be investment capital -- with one carve-out. Corporation A ran a payroll and tax-filing service, collecting client funds ahead of payroll-tax due dates and investing the pooled bala…
If a corporation with deferred installment-sale gain on New York real estate transfers the remaining notes to an affiliate before the gain is fully recognized, must it accelerate the deferred gain into New York entire net income right away?
Likely yes for the actual corporation, but the Department can't pre-commit in an advisory opinion. Corporation X sold New York City real property in 1982 on an installment basis with no gain recognize…
For New York's corporate payroll-factor computation, are payments to independent corporate sales representatives (rather than employees) excluded from both the numerator and denominator of the payroll factor?
Yes. The taxpayer, an out-of-state apparel designer/distributor, sold through three independent corporate sales representatives whose own employees (salespersons) worked in New York and nearby states,…
Before a proposed reorganization is even completed, can the Tax Department confirm in advance whether a holding company and its operating subsidiary will be allowed to file a combined New York franchise tax report?
No, not in advance. An S-corporation client (OLDCO) planned to have its sole shareholder contribute OLDCO stock to a new holding company (NEWCO) in a tax-free IRC section 351 exchange, after which NEW…
If an out-of-state parent corporation is mistakenly listed as the record owner of New York real property that its subsidiary actually purchased, operates, and pays taxes on, does the parent become subject to New York franchise tax merely because of that clerical title error?
No. Petitioner, a Michigan corporation not authorized to do business in New York, had no involvement with New York operations -- its wholly owned New York-qualified subsidiary (PVS-NY) purchased, oper…
Is an unincorporated, nonprofit residential condominium that earns income from common laundry and garage facilities subject to New York's Article 9-A franchise tax for years before 1989, when the definition of 'corporation' required actually conducting business?
Yes. This unincorporated, nonprofit residential condominium, organized under Real Property Law Article 9-B, derives revenue from common-charge assessments, reserve-fund interest, and common laundry an…
If a corporation voluntarily dissolved decades ago but keeps title to and rents out the same real property, does it still owe New York franchise tax, and can it elect New York S corporation status?
Yes, it remains taxable, and yes, it can elect S status if otherwise eligible. Judsu Realty Corp. voluntarily dissolved in 1965 but has continued ever since to hold fee title to, and operate the renta…
If an out-of-state trade-show promoter's only New York activity is renting a convention center for a single three-day franchise expo, does that one event make it subject to New York corporate franchise tax?
Yes. Blenheim Franchise Shows, Inc., a Florida-based producer of small franchise expos with its only office in Winter Park, Florida, produced 43 shows nationwide in 1990 -- only one of them in New Yor…
If an out-of-state manufacturer's only New York presence is a handful of employee-days per year repairing products it sold, is that enough activity to make it subject to New York's corporate franchise tax?
Yes. The American Crane Corporation, a North Carolina crane manufacturer with all operations based in Wilmington, sent a small service department into New York for a maximum of about two weeks a year …
If a company has no office in New York but its employees occasionally spend a small amount of time there, does any of their compensation count in the numerator of the Article 9-A payroll factor?
No -- the payroll factor numerator is zero. Himont USA, Inc., a Delaware company with no office or place of business in New York and no New York-resident employees, had a small property factor (about …
If an out-of-state broker-dealer trades securities in New York only through independent brokers, but also acts as an AMEX options specialist requiring a leased exchange seat, is it doing business in New York for franchise tax purposes?
Yes. Taxpayer, a Delaware S corporation whose sole office is in Houston, Texas, trades stocks, bonds, and options on exchanges nationwide, executing all trades -- both proprietary and client -- throug…
When a New York S corporation reincorporates into a different state through a tax-free F-reorganization merger, does its New York S election survive, or do the shareholders have to make a brand-new election and file two short-period corporate returns?
The S election itself survives, but two short-period corporate franchise tax returns are still required. X Corp, a New York corporation that had elected both federal and New York S status, will merge …
Is an unincorporated residential condominium association that rents out parking spaces and may lease units subject to Article 9-A franchise tax for every year since it was organized, including years before the 1989 law change?
Yes, for all years since organized. Bayside Mews Condominium, an unincorporated 142-unit residential association organized in 1982 under Real Property Law Article 9-B, derives its core revenue from co…
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These are official tax letter rulings and advisory opinions issued by New York's revenue authority in response to questions from specific taxpayers about how the tax law applies to their facts. A ruling is binding on the department only for the taxpayer who requested it and cannot be relied on by anyone else, but it is strong evidence of how the state reads the law. Every ruling above has a plain-English question and short answer, plus a link to the full original source.