A bank holding company plans to relocate its operations to New York and start doing business there, which would otherwise make it subject to New York's general corporate franchise tax. It wholly owns a commercial bank subsidiary that is taxable under Article 32 (the Banking Corporation Franchise Tax). Can the holding company instead get permission to file a single consolidated Article 32 return together with its bank subsidiary?

Plain-English summary

Natwest Holdings, Inc. was planning to relocate its operations to New York and begin doing business there. Standing alone, that would generally make it subject to New York's Article 9-A corporate franchise tax. But Natwest Holdings was a bank holding company under federal law, and it wholly owned National Bank of North America, a commercial bank chartered under Article 3 of the New York Banking Law -- and banks like that are taxed not under Article 9-A but under Article 32, the Banking Corporation Franchise Tax.

Tax Law § 1462(f) gives the Department discretion to let a bank holding company file one consolidated return under Article 32 together with an affiliated Article-32 taxpayer, rather than being taxed separately under the general corporate regime. The Department confirmed that Natwest Holdings met all of § 1462(f)'s requirements: it was a qualifying bank holding company, its subsidiary bank was 100% owned (satisfying the affiliation requirement), and the subsidiary was itself an Article 32 taxpayer.

Ordinarily, formal permission for a consolidated return is only granted after the close of the taxable year in question, and the taxpayer must formally apply at least 30 days before that year's return is due (20 NYCRR § 37.5). What makes this ruling useful is that it front-loads that certainty: the Advisory Opinion itself is a binding Department commitment to grant the consolidated-filing permission once Natwest Holdings actually applies, as long as the facts described stay accurate through the taxable year -- removing the uncertainty of waiting until year-end to find out whether the request will be approved.

What this means for you

Bank holding companies aren't stuck with Article 9-A by default

If your holding company qualifies as a bank holding company under federal law and wholly (or sufficiently) owns a New York-taxable bank, § 1462(f) may let you consolidate onto a single Article 32 return with that bank rather than filing separately under the general corporate franchise tax.

An Advisory Opinion can lock in consolidated-filing permission in advance

Normally you'd have to wait until after your taxable year closes to get formal permission under 20 NYCRR § 37.5. Requesting an Advisory Opinion on the front end -- as Natwest Holdings did here -- can convert that into a standing commitment, provided your facts don't change and you still apply within the 20 NYCRR § 37.5 window (at least 30 days before the return is due).

Common questions

Q: Does this Advisory Opinion itself count as the formal permission for a consolidated return?
A: Not automatically -- it's a commitment that the Department WILL grant that permission once Natwest Holdings formally applies under 20 NYCRR § 37.5, so long as the underlying facts remain accurate.

Q: What has to be true for a bank holding company to qualify for a consolidated Article 32 return with a subsidiary?
A: Under § 1462(f), the holding company must be a bank holding company as defined by state or federal bank-holding-company law, and the affiliated corporation it wants to consolidate with must itself be taxable under Article 32.

Citations and references

Statutes and guidance:

• Tax Law § 1462(f)
• 20 NYCRR § 37.5

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/corporation_ao_1981.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/corporation/a81_7c.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-81 (7) C
Corporation Tax
December 3, 1981

Taxpayer Services Division
Technical Services Bureau
STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. C811008B

On October 8, 1981, a Petition for Advisory Opinion was received from Natwest Holdings,
Inc., c/o Charles S. Crompton, Jr., 100 West Tenth Street, Wilmington, Delaware 19801.
At issue is whether Petitioner will, if it re-locates its operations to New York and commences
doing business therein, so as to become subject to Article 9-A of the Tax Law, be permitted to file
a consolidated return, under Article 32 of the Tax Law, with a wholly owned subsidiary which is a
commercial bank.
Article 32 of the Tax Law imposes the State's Franchise Tax on Banking Corporations.
Section 1462(f) of the Tax Law provides, in relevant part, that: "The commission may, in its
discretion, authorize bank holding companies as defined in article three-a of the banking law or the
federal bank holding company act of nineteen hundred fifty-six, as amended, to make a consolidated
return with affiliated corporations taxable under this article in which case the consolidated tax will
be computed in accordance with the provisions of this article."
Petitioner states that it is a bank holding company as defined in the Federal Bank Holding
Company Act of 1956, as amended. Petitioner also indicates its subsidiary is a commercial bank
formed under Article 3 of the Banking Law. Such subsidiary is therefore a banking corporation,
taxable under Article 32 of the Tax Law. Finally, Petitioner states that its subsidiary is 100% owned
by Petitioner, thus satisfying the statute's requirement of affiliation. Petitioner and its subsidiary,
National Bank of North America, assuming the former to have commenced doing business in New
York, would accordingly meet all of the requirements for permission to file tax returns on a
consolidated basis under Article 32 of the Tax Law. Such permission is normally granted only after
the close of the taxable year with respect to which permission is requested, and must be applied for
at least 30 days prior to the date when the return for such taxable year is due. 20 NYCRR 37.5.
However, this Advisory Opinion constitutes a commitment to grant such permission, when applied
for pursuant to 20 NYCRR 37.5, assuming the Petitioner's statement of facts to be accurate and to
continue to apply throughout the taxable year.

DATED: December 1, 1981

JAMES H. TULLY., COMMISSIONER
TP-8 (4/80)

s/LOUIS ETLINGER
Deputy Director
Technical Services Bureau

LOUIS M. JACOBSON, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR