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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If three doctors incorporated only to satisfy a bank's mortgage requirement, believed the corporation was dissolved and the property reconveyed to them personally years earlier, but the corporation was actually dissolved by proclamation years later than believed, for which years does it owe Article 9-A tax?
Highmount Medical Building, Inc. was incorporated in 1978 solely because a construction lender required the mortgagor to be a corporation (with the lender's advance consent to later reconvey the prope…
Does a not-for-profit homeowners association lose its Article 9-A tax exemption once it starts collecting dues and maintaining shared community property for its members?
Yes, once the association becomes active. Lake Shore Hills Homeowners Association was incorporated in 1983 but stayed inactive -- no dues, no maintenance activity -- until 1988, when it began collecti…
Does a New Jersey printing company that only solicits orders in New York, ships from out of state, and occasionally delivers finished goods through its salesmen owe New York's Article 9-A corporate franchise tax?
No. ROP Color, Inc., a New Jersey computerized typesetting and color-separation business, had no office, property, or capital in New York -- its only in-state activity was salesmen soliciting orders (…
Is a New York corporation that was dissolved by proclamation in 1926 -- before the law that would have taxed it for holding property -- still liable for franchise tax or subject to a tax lien on real estate it still holds title to?
No, and yes to the lien release. 20th Century Realty Company was dissolved by Proclamation of the Secretary of State on March 13, 1926 -- 47 days before an April 29, 1926 amendment to former Tax Law s…
Is a proposed New York investment subsidiary of Chase Manhattan Corporation -- organized under the federal Bank Holding Company Act's section 4(c)(7) to invest in equity and debt securities for its own account -- taxed as a banking corporation under Article 32, or under the general Article 9-A franchise tax?
It depends on facts determined at year end, not on how the subsidiary is organized. Chase Manhattan Corporation ('CMC') proposed to form a New York investment company (the 'Company'), organized under …
Does an out-of-state corporation that holds a passive limited-partnership interest in a New York cogeneration project owe New York franchise tax, and if so, is it taxed under the general Article 9-A rate or the utility-specific Article 9/section 186 rate?
Yes to nexus, and it may be Article 9 instead of Article 9-A. PEC Fort Drum, Inc., a Florida corporation with no independent New York presence, held an indirect 10% foreign-corporate-limited-partner i…
Is J.P. Morgan's proposed new New York investment subsidiary -- formed under the federal Bank Holding Company Act's section 4(c)(7) to make leveraged-buyout and venture-capital securities investments -- taxed as an Article 32 banking corporation, or under general Article 9-A?
It depends on year-end facts, not the federal charter. J.P. Morgan & Co. Incorporated ('JPM'), which owns 100% of Morgan Guaranty Trust Company of New York ('MGT') and files combined Article 32 return…
When a second-tier subsidiary's dividend is paid directly to the ultimate parent (skipping the middle-tier parent's books by oversight), can the ultimate parent still exclude it from New York entire net income as income from subsidiary capital?
Yes, once properly recharacterized. Corporation S (wholly owned by D) declared a dividend to D, its shareholder of record, but with D's informal agreement the cash was paid directly to D's parent P --…
Does a Virginia temporary-staffing company with no office or property in New York owe Article 9-A franchise tax simply because it places its own temporary employees to work at New York client sites?
Yes. Quantum Resources Corporation, a Virginia-based provider of temporary clerical and technical personnel, had no offices, capital, or property of its own in New York -- all billing, payroll, and co…
When out-of-state vendors sell merchandise through airport video-terminal kiosks that ship goods to New York customers, do the vendors have to collect New York sales tax, is the kiosk operator liable as a co-vendor, and do the vendors owe New York income or corporate franchise tax?
Mixed answer across three taxes. Mitchell Sorkin's client planned computerized advertising video terminals at airports (within and outside New York) letting travelers direct-dial out-of-state vendors'…
How does New York tax a utility's IRC section 468A nuclear decommissioning trust -- as a corporation itself, as a grantor trust attributed to the utility, and what happens to the utility's own franchise and gross-receipts taxes when the trust's accumulated earnings are finally distributed decades later?
The Master Trust itself owes neither Article 9-A corporate franchise tax nor Article 22/30 personal income tax, but Con Edison will owe gross-receipts tax on the eventual profit when it's distributed.…
Is a digital-microwave-network company that leases dedicated data/voice circuits to businesses a taxable 'transmission corporation' under Article 9 sections 183 and 184, even though it isn't a licensed common carrier and can't connect directly to the public phone network?
Yes, once its receipts are principally from that business -- and it's also separately subject to the section 186-a telephone-service tax regardless. Interactive Media Services, Inc. operates a digital…
Is a corporation still liable for New York franchise tax and its shareholders liable as transferees, when the corporation was dissolved by proclamation in 1978 but kept a bank account, collected rents, and stayed listed as landlord on renewed leases for another decade before formally transferring the property?
Yes to both. Barshabe Realty Corp. was dissolved by proclamation on September 26, 1978, but its bank account (opened in 1972 for rent deposits) stayed open, and its tenant leases were continued and re…
Does a low-income housing cooperative organized under Article 11 of the Private Housing Finance Law have to file New York State corporate franchise tax returns, even though it's federally classified as a cooperative housing corporation that pays some federal corporate income tax?
No filing required for state purposes. The corporation was organized under Article 11 of the Private Housing Finance Law and Business Corporation Law section 402 to develop a low-income housing projec…
Does an out-of-state financial trading company create New York nexus by having independent brokers trade commodity futures on the COMEX floor, if it occasionally takes brief warehouse-receipt title to precious metals held in New York vaults?
Likely no nexus, though the Department left the ultimate call to the facts. Cargill Financial Services Corporation, a Delaware trading subsidiary of Cargill, Incorporated with no employees, office, or…
Can a New York corporate franchise tax lien on a dissolved corporation's only asset be compromised (reduced) for a sale, when the property's appraised value is less than the tax owed?
Yes, down to the property's appraised value. Finger Lakes Realty Company Incorporated was dissolved by proclamation in 1967 and owed over $12,347.82 in accumulated franchise taxes, interest, and penal…
Is a Swiss nonprofit medical-research joint-stock company, federally tax-exempt under IRC section 501(c)(3) and dedicated entirely to charitable cancer research with no shareholder profit rights, exempt from New York's Article 9-A franchise tax simply because it has stock?
No, it's taxable. The Ludwig Institute for Cancer Research is a Swiss nonprofit joint-stock company devoted entirely to charitable cancer research, funded by an endowment, with fifty shares carrying o…
When a company's New York net operating loss for a particular year has already been fully used up in an earlier aggregate carryforward, but the federal loss for that same year still has unused carryforward remaining, can the company still claim a New York aggregate NOL deduction for a later year that includes that already-exhausted year?
No -- a year with a fully exhausted New York NOL drops out of later New York aggregates, even while the corresponding federal loss for that year still has carryforward remaining. Arista Records, Inc. …
If a REIT forms a wholly owned subsidiary corporation that's a 'qualified REIT subsidiary' under IRC section 856(i) to hold a New York real estate partnership interest, does that subsidiary still owe New York Article 9-A tax on its own income, or does everything flow up to the parent REIT?
The subsidiary remains a separate Article 9-A taxpayer, but effectively owes only the fixed dollar minimum tax. Corporate Property Investors (a Massachusetts business trust REIT under IRC section 856/…
Is an unincorporated residential condominium association, whose only income is common-charge assessments and interest, taxed as a corporation under New York's Article 9-A franchise tax?
Yes. 103 Avenue A Condominium is an unincorporated association organized under Article 9-B of the Real Property Law (22 residential units, 2 commercial units) that issues no stock or ownership certifi…
Can a petroleum wholesaler form a separate corporation (NEWCO) to handle fuel imports, so that the wholesaler itself avoids Article 13-A importer status and its associated Article 9-A tax add-back, and under what specific delivery/title arrangements does a purchase count as 'importing'?
Yes, a separate corporate structure works, subject to real operational separation and detailed title/delivery rules. Petroleum Sales and Service, Inc., a vertically integrated Buffalo motor-fuel whole…
Does a California company that sells computerized movie-theater management systems nationwide, with a New York sales footprint limited to about 4% of revenue and just 13 installation trips over five years, owe New York Article 9-A franchise tax for sending an employee to install and train customers on each system sold there?
Yes, subject to tax for all years at issue. Theatron Data Systems, Inc., a California corporation marketing automated movie-theater management systems nationwide, had no New York office, assets, or ba…
Does a corporation that was dissolved decades ago and holds no assets owe New York franchise tax just for signing a deed to fix a title defect from its original 1967 liquidation?
No. Signing a corrective deed solely to fill a gap in the chain of title, with no other activity and no assets, is not "conducting business" — the dissolved corporation owes no franchise tax for any y…
Does an unincorporated condominium association organized under New York's condominium law owe Article 9-A corporation franchise tax if it earns income beyond just common charges, like a laundry room concession?
Yes. A condominium association that earns income from a laundry room concession and storage charges — not just common-charge assessments — is providing a medium for conducting business and sharing gai…
If a parent holding company spins off its New York lending business into a new New York subsidiary, keeps a bank account and books here, but is otherwise run entirely from Japan, does the parent still owe New York corporate franchise tax?
No. Once the parent withdraws its authorization to do business in New York, becomes a purely passive investment holding company managed entirely from Japan, and confines its remaining New York contact…
Can an S corporation carry forward research and development tax credits it earned during a year when it wasn't subject to Article 9-A tax, to a later year after it becomes a regular C corporation again?
No. A research and development tax credit computed for a year when the corporation was an S corporation — and therefore not subject to Article 9-A tax at all — cannot be carried forward to a later yea…
Is a nonprofit professional corporation exempt from New York corporate franchise tax if it holds federal 501(c)(3) tax-exempt status but was required by state law to issue stock?
No. New York's nonprofit franchise-tax exemption applies only to corporations that have no stock or shares at all — a stock corporation stays taxable under Article 9-A even if it operates strictly on …
Does a New York corporation qualify for New York's reduced 'small business taxpayer' franchise tax rates if it is wholly owned by a foreign (non-U.S.) parent whose own income and capital exceed the small business thresholds?
Yes. Because the foreign parent is not an "includible corporation" in a federal affiliated group, the New York subsidiary is tested on its own numbers, not combined with its foreign parent — so it qua…
When a corporation had a federal S election in effect (but no New York S election) during its loss years, how is its New York net operating loss carryforward computed for a later year when it's a regular C corporation?
The New York NOL carryforward is limited to the amount that would have been allowed under IRC § 172 as if the corporation had never made the federal S election during the loss years — recomputing the …
When a company sells stone and gravel and also delivers it to customers, which parts of its revenue count as "transportation" for deciding whether it's taxed as a transportation corporation under Article 9 instead of a general business corporation under Article 9-A?
Delivery/hauling charges count as transportation revenue (Article 9) in all three billing setups — pure delivery fees, separately stated delivery charges, and the delivery-attributable portion of a lu…
Does an out-of-state company owe New York corporate franchise tax just because its employees taught four five-day training courses in New York, even though another state's tax rules would attribute the income to that other state instead?
Yes. Sending employees into New York to teach paid courses is sufficient presence to constitute "doing business" in New York and triggers Article 9-A franchise tax, regardless of whether another state…
Does producing office furniture — cutting and welding steel parts, powder-coat painting, and upholstering chairs and panels — count as "manufacturing" for New York's investment tax credit and economic development zone tax credit?
Yes. Gathering raw materials and cutting, welding, painting, and upholstering them into finished office chairs and modular panels is "manufacturing" under the statutory definition, qualifying the acti…
A demolition and excavation contractor that also hauls debris and leases trucks/machinery wants to switch from filing as an Article 9 transportation corporation to Article 9-A — which of its many revenue streams count toward the 50%-of-receipts "principally engaged" test, and can the Department just decide the classification in an advisory opinion?
Carting/hauling of others' debris and soil is Article 9 transportation revenue; hauling the company's own property is neither Article 9 nor Article 9-A revenue; material sales, disposal service, machi…
If a business believed for 11 years that it was a validly incorporated New York corporation — filing corporate tax returns and paying corporate taxes the whole time — but later discovers the incorporation paperwork was never actually completed, was it a corporation subject to franchise tax all along?
Yes. Because the organization held itself out as a corporation and conducted business as one since 1977 — filing corporate returns and paying corporate taxes — it is treated as a corporation subject t…
A small company provides both a telephone answering service and a telex/fax relay service — does owning no transmission equipment of its own keep it out of New York's Article 9 telegraph/telephone tax, or does the telex/fax activity still count as a taxable transmission business?
A telex/fax service is taxable under Article 9 as a telegraph/telephone business regardless of whether the company owns any transmission equipment or lines, while a telephone answering service is an A…
When a securities broker-dealer invests customer funds in repurchase agreements (repos) with banks, is that investment "investment capital" under New York's franchise tax, or something else — and does it matter whether the repo is really a purchase of securities versus a secured loan?
It depends on whether the repo is, in substance, a purchase of the underlying government securities (in which case it can be investment capital if it meets the other statutory requirements) or in subs…
When a manufacturer computes whether a building is 'principally used' more than 50% for production and storage (to qualify for the investment tax credit), does unfinished, unused excess-capacity floor space count in the calculation?
Yes. Unfinished excess-capacity space that can only support storage must be included in the denominator of the usable-business-floor-space fraction (total floor space, excluding only bathrooms/cafeter…
Does New York's new 1989 corporate-acquisitions tax (the "M&A Act") apply to the Kohlberg Kravis Roberts leveraged buyout of RJR Nabisco, which closed just before the law took effect, or to the internal merger and any later restructuring that followed?
No. Because the M&A Act took effect April 19, 1989 and RJR Acquisition Corporation's purchase of 74.3% of RJR Nabisco's stock closed February 9, 1989 — before the effective date — that acquisition fal…
Is a foreign nonprofit agricultural cooperative, authorized to do business in New York under the Not-For-Profit Corporation Law, automatically exempt from New York corporate franchise tax?
Not automatically. Being a nonprofit cooperative or being authorized under the Not-For-Profit Corporation Law doesn't by itself exempt a cooperative from Article 9-A tax — but if the cooperative actua…
If a U.S. company's export-sales subsidiary is a Foreign Sales Corporation (FSC) that properly uses the IRS's safe-harbor administrative pricing rules to set its commissions, does that automatically mean New York can't require a combined franchise tax report between the parent and the FSC?
No. Using the IRC's administrative pricing safe harbor for FSC commissions doesn't by itself prevent the Commissioner from requiring a combined report — the administrative pricing rules only cover the…
If a beverage distributor gets IRS approval to switch its accounting method for container-deposit income (from a reserve method to the cash method required by Rev. Rul. 78-273), must it use that same new method for New York franchise tax purposes?
Yes. New York's Article 9-A entire net income must always be computed using the same accounting method approved for federal income tax purposes — so once the IRS approves the switch to the cash method…
A mail-order company distributes catalogs through an airline's on-board program (paying the airline a sales commission) and ships merchandise to New York customers who order from those catalogs — does the company owe New York franchise tax, and does it have to collect New York sales tax?
The company is exempt from Article 9-A franchise tax under federal Public Law 86-272 because its only New York activity is order solicitation followed by shipment from outside the state. But it must s…
Does a corporate insurance general agency owe New York franchise tax merely because it's licensed by the New York Insurance Department, licenses independent agents in New York, reviews insurance applications from New York residents, or has its issuing insurers accept and sell policies in New York?
No. None of those activities — insurance licensing, licensing/appointing independent agents in New York, reviewing applications generated by those agents outside New York, or the issuing insurer selli…
When a mortgage banking company packages New York mortgage loans into FNMA/GNMA certificates and sells them, how much of its origination fees, servicing fees, sale gains, and interest income counts as New York business receipts for the corporate franchise tax?
Only the gain -- not the full sale price -- on FNMA and GNMA certificate sales counts as a business receipt, and it (along with origination fees, servicing fees, and interest) is New York-sourced only…
Can an out-of-state life insurance company that isn't licensed to do business in New York buy mortgages secured by New York real estate for investment without owing New York franchise tax?
Yes -- because the company isn't authorized to transact business in New York under an insurance certificate of authority, it owes no premiums tax under section 1510, and section 1505 caps its total Ar…
If a New York corporation dissolves but keeps holding title to real property purely as a nominee for other people's benefit, does it still owe corporation franchise tax and stay subject to a franchise-tax lien?
No -- a dissolved corporation that does nothing but hold record title to real property as nominee for the beneficial owners, with no business activity of its own, is not "conducting business" under se…
Does an out-of-state shell corporation that only holds title to New York land, as a nominee to hide the real buyers' identity from neighbors, owe New York corporate franchise tax?
Yes, but only for the years it existed while holding title -- an inactive foreign corporation that is a New York record title holder for others' benefit is doing business under section 209.1 and Regul…
If a corporation's only shareholders personally own the building it leases and pay for improvements to it, can either the corporation or the shareholders claim New York's economic development zone investment tax credit for those improvements?
No -- the credit is denied to both sides: the tenant corporation didn't purchase the property (its shareholders did, as separate legal owners), and the shareholder-landlords, though they did purchase …
If a company spins off a manufacturing division (including its New York plant) into a new wholly-owned subsidiary tax-free under IRC section 351, does it have to pay back the New York investment tax credit it already claimed on that plant?
No recapture is required -- because the spin-off qualifies as a tax-free reorganization under IRC section 351 and meets the federal mere-change-in-form conditions (same trade or business, transferor r…
Does a foreign corporation that isn't otherwise subject to New York franchise tax become taxable merely because it privately purchased a limited partnership interest in a partnership that does business in New York?
No -- the Department abandoned a 1954 Attorney General opinion that had treated limited partners as automatically doing business wherever their partnership does, and held that a genuinely passive fore…
Does a New Jersey corporation holding a small (6-8%), non-controlling limited partnership interest in a New York investment fund become subject to New York franchise tax just because the fund does business here?
No -- following the same reasoning as its companion opinion issued the same day (TSB-A-88(11)C), the Department held that a foreign corporation's passive, non-controlling limited partnership interest …
Is an unincorporated cattle-breeders' club that runs a commission cattle auction, but issues no stock or ownership certificates, subject to New York's corporate franchise tax?
No -- because the club is an unincorporated association that issues no stock, certificates, or other written instruments evidencing ownership interests, it doesn't meet the regulatory definition of a …
When an insurance holding company's Subpart F income is deemed a dividend, is the 50% of that deemed dividend included in New York entire net income treated as investment income (from investment capital) or as business income?
It depends on direct ownership: the taxable 50% of a Subpart F deemed dividend is investment income only to the extent the taxpayer has a direct investment (not exceeding 50% ownership) in the stock o…
Are participating loans a real-estate lender made to out-of-state partnerships 'investment capital' (favorably allocated) or 'business capital,' and does a tax-free reorganization change how the resulting interest income is sourced to New York?
The loans are business capital, not investment capital -- because investment capital is limited to securities issued by corporations or governments, and a loan to a partnership doesn't qualify -- so t…
As a general matter (not tied to one company's specific facts), does a foreign corporation become subject to New York's corporate franchise tax merely by becoming a limited partner in a limited partnership that does business in New York?
No -- addressing this as a general hypothetical rather than one company's specific facts, the Department held that a foreign corporation which is otherwise not subject to Article 9-A does not become d…
Does an in-store 'eye examination unit' used by a retail optical chain to test customers' vision before filling eyeglass prescriptions qualify for New York's investment tax credit as manufacturing/processing equipment?
No -- the investment tax credit requires property principally used in manufacturing or processing (a substantial or significant change to the shape, form, or nature of tangible personal property), and…
Under three different levels of New York contact -- no NY presence at all, an agency-like arrangement with an unrelated NY bank, and an actual NY office -- when does a mortgage banking company that packages and sells loans as FNMA/GNMA certificates become subject to New York corporate franchise tax, and how is its income sourced?
Under Alternative #1 (no NY office, no NY-originated loans, only a New York bank delivering certificates and collecting payment as agent) there is NO New York nexus; under Alternative #2 (using an unr…
Must a corporation add back 90% of the interest it pays on a loan from a 'nephew' corporation -- a second-tier subsidiary of its ultimate parent, not a direct shareholder or a shareholder's own subsidiary -- when computing New York entire net income?
No -- section 208.9(b)(5)'s 90% interest addback only reaches interest paid to a shareholder owning more than 5% of the taxpayer's stock, or to a subsidiary of such a shareholder; a 'nephew' corporati…
Is a nuclear plant decommissioning trust fund subject to New York's corporate franchise tax or personal income tax, and can the Department rule on New York City's General Corporation Tax?
No to both state taxes -- the trust isn't a stock-issuing 'corporation,' so Article 9-A doesn't apply, and because it has no federal taxable income (it would otherwise qualify as a grantor trust), it …
After a shell corporation acquires a target company's assets by merger and inherits its investment tax credit, can it claim the follow-on employment incentive tax credit using its own pre-merger employment level (zero employees) as the statutory baseline?
Yes -- the successor corporation qualifies for the employment incentive tax credit for the two years after the merger, because its own employment level in those years exceeded 101% of its own (pre-mer…
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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.