The New York State Department of Taxation and Finance issued an advisory opinion determining that a securities broker may source receipts from “matched principal transactions” based on the “production credit method” provided in New York tax law. The taxpayer was a U.S. entity operating in six states, including New York. Although the taxpayer was not a registered broker-dealer with the Securities and Exchange Commission, it indirectly owned single member limited liability companies (SMLLCs) that were registered broker-dealers. One SMLLC frequently engaged in voice-brokered and electronically traded matched principal transactions, whereby the SMLLC acted as principal, buying securities from a seller and selling those securities to a separate buyer. The Department determined that the taxpayer is allowed to source income derived from matched principal transactions—limited to the spread between the purchase and sale price of the securities, and excluding any related commission—based on production credits awarded to the trading desk associated with each transaction. In so doing, the Department concluded that the SMLLC’s broker-dealer status, like its income, flows through to the taxpayer as the single member. This position represents a broad application by the Department of the production credit sourcing methodology for broker-dealers. N.Y. Advisory Opinion TSB-A-13(11)C (Dec. 20, 2013).