The New York State Department of Taxation and Finance has released draft amendments to the Article 9-A corporate franchise tax regulations to address significant changes to combined reporting under New York State corporate tax reform legislation enacted in 2014 and 2015. For a copy of the draft regulations released on January 22, 2016, click here.
Under corporate tax reform legislation, which went into effect for tax years beginning on or after January 1, 2015, a taxpayer is required to file combined returns including unitary corporations in which it has more than 50% of the voting power. Also, the new law allows commonly owned corporations to make a binding seven year election to file on a combined basis if the 50% voting power test is met, whether or not a unitary relationship exists. The draft regulations provide guidance and numerous examples regarding the application of the new law and state that the term “unitary business” will be interpreted “to the broadest extent permitted under the U.S. Constitution.” The regulations also identify circumstances where a unitary relationship will be presumed, including when the related corporations are horizontally or vertically integrated or when they have “strong centralized management,” and discuss when a newly formed or newly acquired corporation will be presumed to have a unitary relationship with its forming or acquiring corporation. Either the taxpayer or the Department may overcome all such presumptions by “clear and convincing evidence.” In addition, a passive holding company will now be deemed to have a unitary relationship with its operating company or companies as long as the 50% voting power test is satisfied.
The Department is inviting comments on the draft amendments by April 21, 2016.