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?

Plain-English summary

Douglas Condon asked whether a corporation organized under Article 11 of the Private Housing Finance Law and Business Corporation Law section 402 -- built exclusively to develop a low-income housing project in the Bronx, with all income used for corporate purposes and no private inurement -- must file New York State franchise tax returns once it also becomes a federal "cooperative housing corporation" under IRC section 216(b)(1), operated for the benefit of shareholder-occupants.

Tax Law section 209.4 flatly exempts this exact category. The statute explicitly carves out "housing development fund companies organized pursuant to the provisions of article eleven of the private housing finance law" from Article 9-A tax. Because the corporation was organized precisely under that Article 11, the Department found it categorically exempt -- no franchise tax return filing or payment obligation at all. Critically, this exemption doesn't depend on federal tax treatment: the fact that the corporation may separately be classified as an IRC section 216(b)(1) cooperative housing corporation, required to file federal returns and pay federal corporate income tax on a portion of its income, has no bearing on its New York State exemption -- the two tax systems are analyzed independently. The Department could not address the separate question of New York City General Corporation Tax filing obligations, since that tax isn't among those the Commissioner is authorized to issue advisory opinions about.

What this means for you

Nonprofit or limited-equity housing cooperative developers in New York

If your cooperative is organized under Article 11 of the Private Housing Finance Law (a common vehicle for subsidized/limited-equity co-ops, including HDFCs), you're categorically exempt from New York State corporate franchise tax under section 209.4 -- no facts-and-circumstances analysis needed, unlike many other nonprofit exemption categories. Don't assume federal cooperative housing corporation tax obligations under IRC section 216 carry over to state filing requirements; they don't.

Accountants handling housing cooperative tax compliance

Remember that the New York State exemption and New York City's General Corporation Tax are entirely separate regimes administered by different authorities -- the Department of Taxation and Finance can't rule on NYC filing obligations, so check with NYC Department of Finance separately for that question.

Common questions

Q: Does paying federal corporate income tax as an IRC section 216 cooperative housing corporation trigger a New York State franchise tax filing obligation too?
A: No. The federal classification and any federal tax owed are irrelevant to the New York State exemption under section 209.4 for Article 11 Private Housing Finance Law corporations.

Q: Does this exemption cover New York City's General Corporation Tax as well?
A: The Department couldn't say -- NYC's General Corporation Tax isn't administered by the state Commissioner of Taxation and Finance, so no opinion was issued on that question.

Q: What's required to qualify for this exemption?
A: Organization under Article 11 of the Private Housing Finance Law specifically -- that categorical status is what triggers the section 209.4 exemption, not simply being a nonprofit or cooperative housing entity generally.

Citations and references

Statutes:

• Tax Law section 209.4 (Article 9-A exemption for Article 11 Private Housing Finance Law housing development fund companies)
• Internal Revenue Code section 216(b)(1) (federal cooperative housing corporation definition)
• Tax Law section 171, paragraph 24 (scope of Commissioner's advisory opinion authority; excludes NYC General Corporation Tax)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/corporation_ao_1990.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/corporation/a90_19c.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-90(19)C
Corporation Tax
September 27, 1990

Taxpayer Services Division
Technical Services Bureau

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. C900823C

On August 23, 1990 a Petition for Advisory Opinion was received from Douglas Condon,
347 5th Avenue, Suite 803, New York, New York 10016.
The issue raised by Petitioner, Douglas Condon, is whether a corporation organized pursuant
to Article 11 of the Private Housing Finance Law and Section 402 of the Business Corporation Law
which becomes a cooperative housing corporation pursuant to Section 216 of the Internal Revenue
Code is required to file New York State and New York City tax returns.
The corporation at issue is organized pursuant to Article 11 of the Private Housing Finance
Law and Section 402 of the Business Corporation Law.
The corporation is organized exclusively for the purpose of developing a housing project for
persons of low income and is located in Bronx, New York. All income and earnings of the
corporation shall be used exclusively for corporate purposes and no part of the net income, net
earnings or assets of the corporation shall inure to the benefit or profit of any private individual, firm,
corporation or association.
The housing project of the corporation shall be operated exclusively for the benefit of persons
who are entitled to occupancy in the housing project by reason of ownership of shares in the
corporation.
Section 209.4 of Article 9-A of the Tax Law provides in part that:
". . .housing development fund companies organized pursuant to the provisions of
article eleven of the private housing finance law shall not be subject to tax under this
article."
Since the corporation at issue was organized pursuant to Article 11 of the Private Housing
Finance Law, it is not subject to tax under Article 9-A of the Tax Law. Accordingly the corporation
is not required to file any corporation franchise tax returns with the Department of Taxation and
Finance. The fact that the corporation may be a cooperative housing corporation as defined in
Section 216(b)(1) of the Internal Revenue Code and may be required to file federal tax returns with
the Internal Revenue Service and pay federal corporate income tax on a portion of its income, does
not impose any obligation upon it to file any New York State corporation franchise tax returns or pay
any New York State corporation franchise tax.
Section 171, paragraph twenty-fourth of the Tax Law provides that the Commissioner of
Taxation and Finance shall "render advisory opinions with respect to taxes administered by such
commissioner. . . ." The New York City General Corporation Tax is not among the taxes
TP-9(9/88)

-2­
TSB-A-90(19)C
Corporation Tax
September 27, 1990

administered by the Commissioner of Taxation and Finance. Accordingly, the Commissioner is not
authorized to issue an advisory opinion with respect to such tax and no opinion is rendered herein
with respect to the issue of whether the corporation in issue is required to file New York City tax
returns.

DATED: September 27, 1990

s/PAUL B. COBURN
Deputy Director
Taxpayer Services Division

NOTE: The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.