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?

Plain-English summary

20th Century Realty Company was incorporated in New York in 1904 to run a general real estate business (broker, appraiser, subdivider, builder). Before it was dissolved, it acquired unimproved land in Suffolk County. The company was dissolved by Proclamation of the Secretary of State on March 13, 1926, and hasn't done business in New York since. But it never distributed the Suffolk County property to its shareholders, and by 1990 the New York Supreme Court had appointed directors just to wind up its affairs -- so the dissolved company was still the record titleholder, and the state had a tax lien against it.

Timing was everything. At dissolution, former Tax Law section 182 taxed corporations based on capital stock employed in New York -- not simply for owning property. Just 47 days after the dissolution, a Laws of 1926 amendment (effective April 29, 1926) would have made domestic corporations taxable for the privilege of holding New York property. But because 20th Century Realty had already ceased to exist as a corporation before that amendment took effect, and no provision in the law at the time reached a dissolved real estate corporation for merely continuing to hold title, the company was never swept into the new holding-property tax. Section 182 was later repealed at the end of 1961, after which real estate corporations became taxable under Article 9-A -- but since the company was never subject to section 182 at the time of its repeal, it never became subject to Article 9-A either. The Department found no franchise tax liability for any year after the 1926 dissolution and directed that the tax lien be released.

What this means for you

Owners or heirs of long-dissolved corporations still holding New York property

If a corporation was dissolved decades ago but title to real property was never formally distributed to shareholders, don't assume a lingering tax lien is valid. The specific dissolution date relative to changes in the tax law matters -- a corporation that ceased to exist before a taxing amendment took effect can be permanently outside that tax's reach, even though it continues to hold title on paper.

Accountants and tax attorneys handling legacy corporate real estate

This is a narrow, fact- and date-specific historical ruling turning on the interplay between former Tax Law section 182, its 1926 amendment, its 1961 repeal, and Article 9-A's start. It's a useful illustration of how to research a very old dissolution against the specific statutory regime in effect at the time, but each case requires tracing the exact dates and the law as it stood on each one.

Common questions

Q: Does dissolving a corporation automatically end its New York tax exposure?
A: Not automatically -- it depends on the law in effect at the time and whether the corporation continued to hold property or conduct business afterward. Here, the specific date of dissolution (before an amendment that would have taxed property-holding) was decisive.

Q: Can a dissolved corporation still be the record owner of real property?
A: Yes -- as here, where court-appointed directors were winding up the company's affairs decades later and title had never been distributed to shareholders.

Q: Does this ruling mean any pre-1926 dissolved New York corporation is automatically exempt?
A: No. This opinion binds the Department only for 20th Century Realty Company on these specific facts and dates; another dissolved corporation's situation must be independently analyzed against the law in effect when it dissolved.

Citations and references

Statutes:

• Tax Law former section 182 (pre-1962 franchise tax on capital stock employed in New York; as amended by Laws of 1926, ch. 674, taxing domestic corporations for holding New York property, effective April 29, 1926)
• Tax Law Article 9-A (successor franchise tax after section 182's repeal effective December 31, 1961)
• Tax Law section 209.3 (doing business in New York after dissolution)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/corporation_ao_1991.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/corporation/a91_7c.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-91(7)C
Corporation Tax
March 18, 1991

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. C900828A

On August 28, 1990, a Petition for Advisory Opinion was received from 20th Century Realty
Company, c/o McNulty-Spiess, 633 E. Main Street, P.O. Box 757, Riverhead, New York 11901.
The issue raised by Petitioner, 20th Century Realty Company, is whether it is subject to tax
under Article 9-A and whether it is entitled to a release of lien of the New York State Franchise Tax
for the years 1926 to date where Petitioner was dissolved in 1926 and has not conducted business
in New York State subsequent to dissolution but is the record owner of real property located in New
York State.
Petitioner was created and organized under the laws of New York State relating to the
organization of stock corporations. It was incorporated on March 8, 1904. Petitioner's certificate of
incorporation provides that Petitioner was formed to carry on the business of real estate brokers,
appraisers, operators, sub-dividers and builders in all its branches and in addition thereto to do all
and everything capable of being done and performed in connection with and necessary for or
convenient to the carrying on of a general real estate business. Also, to take, acquire, hold, purchase,
own, buy, lease, sell, let, transfer, mortgage, exchange, improve and otherwise deal in and dispose
of all such real estate as is necessary or convenient for the purposes of conducting and carrying on
or disposing of its business.
Prior to its dissolution, Petitioner acquired title to certain unimproved property in Suffolk
County, New York. Petitioner ceased to do business after it was dissolved by Proclamation of the
Secretary of State on March 13, 1926. By Order dated April 18, 1990, the New York State Supreme
Court ratified George L. Schmelzer and Inge Schmelzer as directors of Petitioner for the purpose
of terminating the affairs of Petitioner. It appears that the dissolved Petitioner is the record title
holder of certain real property located in Suffolk County for the benefit of its shareholders or their
assignees and that said real property has not been distributed to the aforesaid shareholders or their
successors in interest. Petitioner has not conducted business in New York State, as contemplated
under section 209.3 of the Tax Law, after it was dissolved.
For the taxable years Petitioner was incorporated, real estate corporations were subject to tax
under section 182 of the Tax Law. Section 182 of the Tax Law, in effect on the date of dissolution
by proclamation, provided as follows:

TP-9 (9/88)

-2­
TSB-A-91(7)C
Corporation Tax
March 18, 1991

The term "corporation" as used in this section shall include any business conducted
by a trustee or trustees wherein interest or ownership is evidenced by certificates or
other written instruments. For the privilege of exercising its corporate franchises in
this state every domestic corporation, joint stock company or association, and for the
privilege of doing business in this state, every foreign corporation, join stock
company or association, shall pay annually, in advance, an annual tax to be computed
upon the basis of the amount of its capital stock, employed during the preceding year
within this state, and upon each dollar of such amount ....
Section 182 of the Tax Law was amended by the Laws of 1926, Chapter 674 in effect April
29, 1926 to provide that a domestic corporation is subject to tax for the privilege of holding property
in New York State. However, Petitioner was dissolved prior to this amendment. On the date of
Petitioner's dissolution by proclamation, the corporation ceased to exist. There were no provisions
in the Tax Law at that time to continue to tax a dissolved real estate corporation because it continued
to hold title to property in New York State.
Therefore, Petitioner was not subject to tax under section 182 of the Tax Law from the date
of dissolution, March 13, 1926, to December 31, 1961, the date section 182 of the Tax Law was
repealed. After such repeal, real estate corporations became subject to tax under Article 9-A of the
Tax Law. Since Petitioner was not a corporation subject to tax under section 182 of the Tax Law
at the time of its repeal, Petitioner never became subject to tax under Article 9-A of the Tax Law.
Accordingly, since Petitioner was dissolved by Proclamation of the Secretary of State on
March 13, 1926, Petitioner is not subject to tax under section 182 of Article 9 or under Article 9-A
of the Tax Law for any taxable year subsequent to the date of dissolution. Therefore, a release of
lien for such years should be granted.

DATED: March 18, 1991

s/PAUL B. COBURN
Deputy Director
Taxpayer Services Division

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