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 homeowners association that maintains a private beach for its members subject to New York's corporate franchise tax, even if it elects federal homeowners-association tax treatment under IRC § 528?
Yes -- maintaining the beach for members' benefit is an 'inurement' of net earnings to members, so the association doesn't qualify for the not-for-profit exemption from Article 9-A, regardless of whet…
Does a recording studio that rents studio time and equipment to record-company producers qualify for New York's investment tax credit and sales tax manufacturing exemptions, or is it treated as a rental/service business?
No investment tax credit or employment incentive credit -- because more than half the actual mixing work is done by producers and engineers who aren't Sigma's own employees, Sigma is treated as rentin…
Does a record-mastering company -- which cuts master phonograph records and creates master tapes using its own employees -- qualify for New York's investment tax credit and sales tax production exemptions on its mastering equipment?
Yes -- because Frankford/Wayne's own employees (not outside producers) perform the actual mastering/manufacturing work, its mastering equipment, related environmental/gas systems, and mastering suppli…
Is a U.S. corporation's Subpart F income from its foreign subsidiaries treated as a 'dividend' for New York's Article 9-A and Article 33 franchise taxes, and if so, how much of it can be excluded from entire net income?
Yes -- Subpart F income is treated as a deemed dividend for both Article 9-A and Article 33 purposes, following the Department's own 1966 policy and analogous state-court rulings; if the taxpayer owns…
For New York's business allocation percentage property factor, does the exclusion for 'real property and related equipment' under construction reach only buildings and building-integrated equipment, or also separate personal property like standalone machinery being installed at the same time?
The exclusion is broader than the taxpayer argued -- it also reaches personal property under construction that is functionally tied to the real property construction, such as an assembly line built to…
Is a nonprofit patent-holding corporation exempt from New York's corporate franchise tax if it's a STOCK corporation whose only shareholder is a tax-exempt university?
No -- New York's not-for-profit corporate franchise tax exemption is available only to corporations that have NO stock or shares at all; because Cornell Research Foundation is a STOCK corporation (eve…
Does equipment used to design and develop computer hardware and software products qualify for New York's investment tax credit and research and development credit, and can an unprofitable startup get the investment credit refunded rather than carried forward?
Yes to both credits -- equipment used to design and develop computer software (following the federal treatment of software costs as research expenditures under Revenue Procedure 69-21) and computer ha…
If a taxpayer doesn't contest an erroneous notice of deficiency disallowing part of an investment tax credit, and that year later becomes a closed period under the statute of limitations, can the taxpayer still claim the full investment tax credit carryforward from that closed year when a later, open year is audited?
Yes -- even though the taxpayer can no longer directly contest the closed year's deficiency (both the 90-day protest window and the statute of limitations have run), the Tax Commission can still redet…
Is an out-of-state fuel distributor subject to New York's corporate franchise tax merely because its New York-based parent company keeps its books and provides a shared officer, when the subsidiary itself has no New York office or employees -- but does take title to petroleum within New York before shipping it out of state?
Having a parent-company officer maintain a New York office, and having the parent's own employees keep the subsidiary's books in New York, are NOT by themselves enough to create nexus -- but the subsi…
Does manufacturing equipment used to physically produce and reproduce computer hardware and software products (as opposed to just designing/developing them) qualify for New York's investment tax credit, and does a general-purpose office computer used for project management also qualify?
Yes for the manufacturing/reproduction equipment -- taking a blank tape or disk and imprinting a software program onto it, and manufacturing the physical hardware connector products, both constitute '…
For a printing company's New York receipts factor, should printed materials shipped in bulk to a customer's New York locations be sourced to New York even if the CUSTOMER isn't itself based in New York, and how should mailings to third-party consumers (not the direct customer) be sourced?
Yes -- receipts from books, magazines, and catalogs are sourced to New York whenever the printed goods are actually shipped (via common carrier, company truck, or mail) to a point in New York, regardl…
Does reincorporating from Delaware to New York State (without formally electing federal F-reorganization treatment) terminate a company's existing New York S corporation election?
It depends entirely on whether the federal S election survived the reincorporation -- if the change qualifies for tax-free federal F-reorganization treatment (per Revenue Ruling 64-250) and the FEDERA…
Can a corporate partner in a partnership claim its allocable share of the partnership's investment tax credit on production equipment the PARTNERSHIP purchased, even though the partnership has no Article 9-A tax liability of its own and a partner's interest is technically just intangible personal property rather than a direct share of partnership assets?
Yes -- even though a partnership has no Article 9-A tax liability to apply a credit against, and a partner's interest is technically intangible personalty rather than a direct share of partnership ass…
Does an out-of-state manufacturer that sells only through independent (non-employee) commissioned sales representatives lose the protection of federal P.L. 86-272 -- which shields mere order-solicitation from state income tax -- because it rented a New York showroom for those representatives' convenience for part of the year?
Yes -- P.L. 86-272 protects a company whose ONLY in-state activity is soliciting orders that are approved and filled from outside the state, but renting even a small showroom in New York (here, at the…
Can a corporation subtract from its New York entire net income the amount of stock it contributes to a federal tax-credit employee stock ownership plan (ESOP), which isn't deductible for federal income tax purposes?
No -- New York's Article 9-A only allows a specific subtraction for wages disallowed under IRC § 280C (the targeted jobs credit provision), and the ESOP stock contribution here is disallowed under a D…
Does equipment used solely to install connecting pipeline linking a newly drilled gas well to the existing pipeline system qualify for New York's investment tax credit as equipment used in natural gas 'extraction'?
No -- installing pipeline to connect a newly drilled well to an existing pipeline system is a transportation-related service, not part of the extraction operation itself, and since the pipeline isn't …
Can forward foreign-currency sale contracts, entered into purely to hedge currency-fluctuation risk on equity investments in foreign subsidiaries, themselves be counted as part of 'subsidiary capital' (investments in subsidiary stock) for New York franchise tax purposes?
No -- forward currency contracts, even when purchased specifically and exclusively to protect the value of an existing stock investment in a foreign subsidiary, are not themselves 'investments in the …
A Delaware holding company, wholly owned abroad, does nothing but hold the stock of two operating subsidiaries based in New York City. It has no salaried employees, pays its two officers nothing, and doesn't pay rent for the unpaid mailing-address space it uses at one subsidiary's New York office -- but it keeps its books and records in New York and has its taxes and administrative work handled there. Is that enough to make it subject to New York's Article 9-A franchise tax?
Yes. Noga Holding (USA), Inc. was a Delaware corporation, wholly owned by a non-U.S. parent, whose sole activity was holding 100% of the stock of two other Delaware subsidiaries doing business in New …
A special-purpose finance company was formed solely to buy and lease nuclear fuel to an out-of-state utility, funded by notes issued to a group of banks that include New York lenders. It has no office or employees of its own anywhere; a New York affiliate handles all its administration, books, and records for a nominal fee, and its loan documents were executed in New York at the lenders' insistence. Does that make it subject to New York's Article 9-A franchise tax, even though the nuclear fuel itself never sits in New York?
Yes. Wolverine Energy Company was a foreign corporation formed solely to take title to nuclear fuel for Consumers Power Company (a Michigan public utility) and to finance the purchase of additional fu…
A New York-based finance conduit borrows money by selling short-term commercial paper (or drawing on a bank credit line) and relends the proceeds to an out-of-state utility subsidiary to finance fuel purchases, earning only a nominal fee. Is that enough to make it subject to New York's Article 9-A franchise tax, and if so, can its short-term borrowings be deducted from its assets in figuring its taxable business capital?
Yes to both questions. Clipper Oil Corporation, a foreign corporation authorized to do business in New York, existed solely to (1) borrow money by selling commercial paper notes (270 days or less) or …
Our company is technically incorporated in New York, but we have no office, sales representatives, or any physical connection to the state at all -- we operate entirely out of New Jersey and just ship products to customers nationwide, including some in New York. Are we stuck paying only the $250 minimum Article 9-A tax, or could our New York shipments push us above that?
It may owe more than the $250 minimum. Victor Hasselblad, Inc. was a New York corporation that sat completely inactive from its 1956 formation through 1979. In January 1980, its Swedish camera-manufac…
New York advertising agencies sometimes buy materials -- like photoengraving plates and drawings -- as agent for an out-of-state client, and those materials end up owned by that out-of-state client while briefly located in New York. Does that client's ownership of such materials in New York, by itself, make the out-of-state client corporation subject to New York's Article 9-A franchise tax?
No. The American Association of Advertising Agencies, Inc. (AAAA) raised the issue on behalf of member agencies located in New York that perform services for non-New York clients not otherwise subject…
Our finance subsidiary lends money to affiliated companies in the same corporate family to help fund their capital needs, evidenced by unsecured, non-negotiable intercompany notes that are never sold on any market or exchange. Does the interest we earn on those notes count as investment income from investment capital (potentially more favorably taxed) or as business income from business capital under New York's Article 9-A franchise tax?
Business capital, not investment capital -- meaning the interest is business income. Mobil International Finance Corp. lent money to various companies within the Mobil corporate family to help finance…
Our parent corporation sells a large share of one subsidiary's total resale inventory and 100% of another's, but neither subsidiary is separately subject to New York's Article 9-A tax on its own. Can the Tax Commission force us to file a combined New York return covering the parent and those two subsidiaries, plus a third DISC subsidiary that has no direct purchases from the parent?
Yes for the two goods-supply subsidiaries, but no for the property-less DISC. The Gates Rubber Company sold to its subsidiary National Tires, Inc. an amount equal to about 5.6% of the parent's own sal…
Our federal return showed positive taxable income, but because the Federal Job Credit forced us to give up a wage-deduction on our federal return, New York lets us subtract that same disallowed wage amount from our New York entire net income -- which put us into a New York net operating loss for the year, even though we had none federally. Can we carry that New York-only net operating loss back to earlier tax years for a refund?
No. Allied Fence, Inc. reported taxable income of $2,380.35 on its federal return for the fiscal year ending January 31, 1979, but claimed a Federal Job Credit of $6,960.91, which under I.R.C. § 280C …
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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.