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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A foreign parent corporation owns 100% of one New York subsidiary and 79% of a second, different New York subsidiary engaged in a related but distinct business -- does common majority ownership by the same parent make the second subsidiary 'substantially similar in ownership' to the first, disqualifying it as a 'new business' for the investment tax credit refund election, even though the two subsidiaries aren't owned in identical percentages or by identical shareholders?
Yes -- Corporation C (79%-owned by the common parent, Corporation A) IS 'substantially similar in ownership' to Corporation B (100%-owned by the same parent), and therefore does NOT qualify as a 'new …
A food manufacturer incorporated in 1976 does a public stock offering that shifts about 36.5% of its shares to public investors -- founders still hold 63.5% -- does that ownership change make it a 'new business' eligible to cash out its unused investment tax credits as an immediate refund, instead of just carrying them forward?
No -- Petitioner is NOT a 'new business' under section 210.12(j) and cannot elect the immediate-refund treatment for its unused investment tax credit carryover. Even though roughly 36.5% of its outsta…
When a New York subsidiary with an unused net operating loss merges into its out-of-state parent, can the surviving parent carry that loss forward on its own New York corporation franchise tax return?
Yes, but only for the loss the subsidiary generated while it was actually subject to New York tax. Charrette Corporation could include, on its own New York franchise tax return, the net operating loss…
Is a freight forwarder that owns no trucks or planes taxed as a New York transportation corporation under Tax Law Sections 183-184, or as an ordinary business corporation under Article 9-A?
It depends on whether the forwarder acts as a principal or an agent. A freight forwarder that assumes control of and full responsibility for the shipment -- issuing its own bill of lading and paying t…
Can a homebuilder or commercial-building contractor claim New York's investment tax credit on the machinery and equipment it uses to construct homes and buildings?
No. New York's investment tax credit under Tax Law Sections 210.12 (corporations) and 606(a) (individuals) is limited to property principally used in the production of GOODS by manufacturing, processi…
Are a parent scrap-metal corporation and its New York subsidiary in a 'unitary business' for combined reporting purposes, and must the parent file a consolidated report with its separate DISC subsidiary?
Petitioner and its New York subsidiary SH ARE in a unitary business -- both produce ferrous scrap metal (a related line of business) and there are substantial no-charge, no-profit intercorporate servi…
A U.S. sales-agent company maintains a New York showroom-sales office exclusively for a related foreign manufacturer -- displaying/selling samples, soliciting orders that are filled entirely from the manufacturer's own out-of-state plant -- but the manufacturer keeps tight control over the office (approving its design, setting all sale terms, controlling hiring/firing). Does maintaining that showroom keep the manufacturer within P.L. 86-272's protected 'mere solicitation' safe harbor, or does it cross the line into taxable New York activity? And is the U.S. sales-agent company itself taxable for providing that agency service?
The related alien manufacturer (Hauserman, Ltd.) IS subject to New York franchise tax -- maintaining the New York showroom-sales office exceeds P.L. 86-272's protected solicitation activities, since t…
Two commonly-controlled subsidiaries of the same parent (one profitable, one running losses) plan a tax-free statutory merger mid-year -- however the merger is structured (whichever entity survives), how much of the loss-making subsidiary's current-year losses can offset the profitable subsidiary's income for that same year, and can older, prior-year net operating losses be used right away too?
Regardless of which subsidiary survives the merger, Techtran Systems' current-year (fiscal 1985) losses may offset the other subsidiary's income earned in that SAME fiscal year only in a PRORATED amou…
Can a travel-agency cooperative's headquarters treat 'override commissions' generated by its out-of-state member agencies' bookings as non-New York receipts for franchise tax allocation purposes, on the theory that they're really royalty-like income?
No. Petitioner's override commissions are not analogous to royalty income -- they're payment for services Petitioner itself performs (negotiating commission packages for member agencies and providing …
For a regulated investment company whose entire New York taxable income for a year consists solely of foreign taxes withheld on foreign investments, must the investment allocation percentage be computed using ALL of the company's investment capital, or only the specific foreign investments that produced that income?
All of the company's investment capital, not just the specific foreign investments that produced its taxable income. Tax Law Section 210.3(b)(1) requires the investment allocation percentage to be com…
Does New York's rule requiring interest paid to a more-than-5%-stockholder to be added back to income also reach interest a corporation pays to its 'grandparent' corporation -- the parent of its direct parent?
No. Tax Law Section 208.9(b)(5) requires an add-back only for interest paid on debt owed to a stockholder owning more than 5% of the taxpayer's own capital stock, or to a subsidiary of such a stockhol…
Does New York's rule requiring interest paid to a more-than-5%-stockholder to be added back to income also reach interest a corporation pays directly to its 'grandparent' corporation -- the parent of its direct parent?
No. Commercial Credit Business Services, Inc. was a second-tier subsidiary, wholly owned by Commercial Credit Business Loans, Inc., which was itself wholly owned by Commercial Credit Company. Petition…
If a subsidiary switches from borrowing through its direct parent to borrowing directly from its 'grandparent' corporation, does New York's related-party interest add-back rule apply to the interest it now pays?
No. Commercial Credit Financial Services, Inc. was a second-tier subsidiary, wholly owned by Textile Banking Company, Inc., which was itself wholly owned by Commercial Credit Company. Since January 1,…
For New York's alternative minimum-tax computation (which adds officer salaries back to income), does an employee's honorary or prestige job title -- like 'Managing Director' or 'Principal' -- make them an 'officer' whose salary must be added back, even if they don't actually perform officer functions?
It depends on which title. Employees with the specific titles listed in Tax Law Section 208.12 -- Chairman, President, Vice-President, Secretary, Assistant Secretary, Treasurer, Assistant Treasurer, o…
When a New York corporation with unused investment tax credit and employment incentive credit is statutorily merged into an out-of-state parent, can the surviving out-of-state corporation carry those unused credits forward, and does the merger trigger recapture of credits already claimed?
Yes, the unused credits carry forward, and no recapture is triggered by the merger itself. Because a statutory merger under IRC section 368(a)(1)(A) is a transaction described in IRC section 381(a), t…
Does a video post-production company's studio equipment and building qualify for New York's investment tax credit as property used in the production of goods by 'processing'?
Yes, for the equipment, and conditionally for the building. Unitel Video Services' activities -- recording, editing, and duplicating television commercials and programs, transferring film to videotape…
Is a private ambulance company that also provides emergency medical care en route taxed as a New York transportation corporation (barred from electing S corporation status), or as an ordinary Article 9-A business corporation (eligible to elect S status)?
The ambulance company is a transportation corporation under Sections 183-184, not an Article 9-A business corporation, and therefore cannot elect S corporation status. Even though it provides emergenc…
Is a corporation that owns trucks and leases them to a related transportation company taxed as a transportation corporation itself, or as an ordinary Article 9-A business corporation -- when the petitioner's own factual statements about who controls and drives the equipment contradict each other?
It depends on facts the Department could not resolve from a contradictory petition. If Petitioner truly relinquished supervision and control of its tractors and trailers to Sheehan Carriers, Inc. and …
Does New York's franchise tax exemption for 'limited-profit housing companies' organized under Article 2 of the Private Housing Finance Law also cover nonprofit 'housing development fund companies' organized under Article 11 of that same law -- and if not, can an Article 11 company still be exempt some other way?
No, the Section 209(4) exemption itself does NOT extend to Article 11 housing development fund companies -- it's narrowly construed to cover only limited-profit housing companies organized under Artic…
When a corporation sells the stock of its foreign subsidiaries to a sibling company (an affiliate under common ownership, but not a direct parent-subsidiary relationship) as part of an internal reorganization, is the amount received includible in its New York entire net income?
No, the amount is excluded from New York entire net income. Petitioner planned to sell the stock of its U.K. subsidiaries to CIF, a sibling corporation under the same ultimate parent, as the first ste…
If a company claimed the investment tax credit for several years on property that was also eligible for the (larger) eligible business facility credit, can it go back and amend its returns to switch to the eligible business facility credit instead?
Yes, within the normal refund statute of limitations. Flexovit USA, Inc. held Job Incentive Board certificates of eligibility for an eligible business facility for 1978-1981, but claimed only the inve…
Two affiliated companies share one office and split their combined operating expenses based on relative sales, with the company that overpaid its share reimbursed by the other. Does that reimbursement count as a 'business receipt' in the receipts factor used to calculate New York's business allocation percentage?
No. Mr. Daneli, Ltd. and its affiliate Pateli Fashions, Inc. -- both clothing manufacturers sharing one office, employees, and space -- apportion their combined operating expenses based on each corpor…
An out-of-state typesetting company's New York salesmen solicit orders, pick up customer manuscripts for delivery to the out-of-state plant, and deliver the finished typeset negatives back to New York customers. Does that combination of activities stay within Public Law 86-272's protected 'solicitation' safe harbor, or does it create New York franchise tax nexus?
The corporation remains exempt from New York's Article 9-A franchise tax -- its New York activities fall entirely within Public Law 86-272's protected safe harbor. The out-of-state typesetting company…
Before it opened a formal New York sales office, a Florida homebuilder advertised in New York papers using an officer's home telephone number, and that officer met with prospective customers at his Long Island home. Did that activity amount to 'maintaining an office' in New York, subjecting the company to New York franchise tax even before the formal office opened?
Yes -- Gulf Homes, Inc. was subject to New York's Article 9-A franchise tax even before it opened its formal Massapequa sales office in August 1980. Starting in 1978, Petitioner (a Florida real estate…
A holding company borrows money from its own wholly owned subsidiaries and re-lends those exact funds to its parent corporation at the same interest rate. Must the holding company add back the interest it pays to its subsidiaries as interest 'attributable to subsidiary capital,' even though the borrowed funds never funded an investment in the subsidiaries themselves?
No add-back is required. A Delaware holding company planned to borrow funds from its own wholly owned subsidiaries and immediately re-lend those same funds to its parent corporation at the identical i…
Does New York's related-party interest add-back rule reach interest a second-tier subsidiary pays directly to its corporate 'grandparent'?
No. McCullagh Leasing, Inc. is a wholly owned subsidiary of Auto Fleet Leasing Corporation, itself a wholly owned subsidiary of Commercial Credit Company -- its corporate 'grandparent.' Commercial Cre…
Does New York's related-party interest add-back rule reach interest a second-tier subsidiary pays directly to its corporate 'grandparent'?
No. Relocation Realty Service Corp. is a wholly owned subsidiary of Auto Fleet Leasing Corporation, itself a wholly owned subsidiary of Commercial Credit Company -- its corporate 'grandparent.' Commer…
Does New York's related-party interest add-back rule reach interest a second-tier subsidiary pays directly to its corporate 'grandparent'?
No. C C Leasing Corp. is a wholly owned subsidiary of Auto Fleet Leasing Corporation, itself a wholly owned subsidiary of Commercial Credit Company -- its corporate 'grandparent.' Commercial Credit Co…
Does New York's related-party interest add-back rule reach interest a second-tier subsidiary pays directly to its corporate 'grandparent'?
No. Commercial Credit Equipment Corp. is a wholly owned subsidiary of Auto Fleet Leasing Corporation, itself a wholly owned subsidiary of Commercial Credit Company -- its corporate 'grandparent.' Comm…
If a second-tier subsidiary borrows from its corporate 'grandparent' -- its direct parent's own parent -- rather than from its direct parent or a more-than-5% stockholder, does New York's related-party interest add-back rule reach that interest?
No. Commercial Credit Development Corp. is a wholly owned subsidiary of Auto Fleet Leasing Corporation, which is itself a wholly owned subsidiary of Commercial Credit Company -- making Commercial Cred…
Does New York's related-party interest add-back rule reach interest a second-tier subsidiary pays, at an arm's-length rate, directly to its corporate 'grandparent' holding company?
No. Fleet Factors Corporation, a Rhode Island corporation, is wholly owned by Fleet Commercial Finance Corporation, which is itself wholly owned by Fleet Financial Corporation, a holding company -- ma…
If a corporation is part of a federal consolidated group but files its own separate New York franchise tax report, does it report its allocated 'share' of the group's consolidated federal taxable income, or the income it would have reported had it filed its own separate federal return?
A corporation filing a separate New York franchise tax report, even though it's part of a federal consolidated group, must compute its entire net income as if it had filed its own separate Federal tax…
If a more-than-5% shareholder borrows money solely to re-lend it to the corporation, and the corporation pays interest to the shareholder that just passes through to the shareholder's outside lender, is that pass-through interest exempt from New York's 90% related-party interest add-back as a mere 'conduit' payment?
No. Ampal American Israel Corporation asked the Department to confirm that interest it pays to a shareholder owning more than 5% of its stock would be fully deductible where the shareholder borrows th…
If a more-than-5% shareholder borrows money solely to re-lend it to the corporation, and the corporation pays interest to the shareholder that just passes through to the shareholder's outside lender, is that pass-through interest exempt from New York's 90% related-party interest add-back as a mere 'conduit' payment?
No. Dean Witter Reynolds, Inc. asked the Department to confirm that interest it pays to a shareholder owning more than 5% of its stock would be fully deductible where the shareholder borrows the funds…
If a more-than-5% shareholder borrows money solely to re-lend it to the corporation, and the corporation pays interest to the shareholder that just passes through to the shareholder's outside lender, is that pass-through interest exempt from New York's 90% related-party interest add-back as a mere 'conduit' payment?
No. Esselte Pendaflex Corporation asked the Department to confirm that interest it pays to a shareholder owning more than 5% of its stock would be fully deductible where the shareholder borrows the fu…
If a more-than-5% shareholder borrows money solely to re-lend it to the corporation, and the corporation pays interest to the shareholder that just passes through to the shareholder's outside lender, is that pass-through interest exempt from New York's 90% related-party interest add-back as a mere 'conduit' payment?
No. General Discount Corporation and CBT Leasing Corporation asked the Department to confirm that interest paid to a shareholder owning more than 5% of a corporation's stock would be fully deductible …
A Canadian aluminum manufacturer wants to ship a metal-bearing byproduct to an unrelated New York processor, who will reclaim the aluminum for a fee and ship it straight back to Canada, disposing of the unusable waste. Does owning that material while it's being processed in New York, by itself, create New York franchise tax nexus?
No. Aluminum Company of Canada, Ltd. proposed shipping dross (an aluminum-bearing byproduct of its primary aluminum manufacturing) to an unrelated New York processor, who would reclaim the aluminum fo…
A bank's two new securities-dealer subsidiaries (one owning the other) want to file a combined Article 9-A return together, and also want to know whether interest they'll pay on short-term borrowings from the bank -- their common grandparent -- is subject to the related-party interest add-back. What's the answer to both questions?
Two different answers to two different questions. On COMBINED FILING: Chase Manhattan Government Securities, Inc. ('CMGS') is a wholly owned subsidiary of Chase Manhattan Capital Markets Corporation (…
A finance company's home office is in New York, but larger loans require credit approval from out-of-state regional offices, with only the very largest requiring a final review back in New York. How much of the resulting loan interest income counts as 'earned within' New York for the business allocation percentage?
The Department set out the governing framework but declined to give a specific percentage. CIT Financial Corporation, headquartered in New York, is a finance-business holding company whose finance agr…
If a more-than-5% shareholder borrows money solely to re-lend it to the corporation, and the corporation pays interest to the shareholder that just passes through to the shareholder's outside lender, is that pass-through interest exempt from New York's 90% related-party interest add-back as a mere 'conduit' payment?
No. Heraeus-Volkert, Inc. asked the Department to confirm that interest it pays to a shareholder owning more than 5% of its stock would be fully deductible where the shareholder borrows the funds sole…
If a more-than-5% shareholder borrows money solely to re-lend it to the corporation, and the corporation pays interest to the shareholder that just passes through to the shareholder's outside lender, is that pass-through interest exempt from New York's 90% related-party interest add-back as a mere 'conduit' payment?
No. KB Business Credit, Inc. asked the Department to confirm that interest it pays to a shareholder owning more than 5% of its stock would be fully deductible where the shareholder borrows the funds s…
If a more-than-5% shareholder borrows money solely to re-lend it to the corporation, and the corporation pays interest to the shareholder that just passes through to an outside lender, is that pass-through interest exempt from New York's 90% related-party interest add-back as a mere 'conduit' payment?
No. MC Minerals Corporation and Mitsubishi International Corporation asked the Department to confirm that interest paid to a shareholder owning more than 5% of a corporation's stock would be fully ded…
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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.