The Department of Taxation and Finance ruled that the taxpayer, a New York State LLC, will be eligible to claim Empire Zone (“EZ”) tax benefits after the proposed change in its ownership structure for the remainder of its benefit period, provided it continues to be certified as eligible for EZ tax benefits (i.e., obtains a certificate of eligibility and an EZ Retention Certificate (“EZRC”)) by the Department of Economic Development (“DED”) and meets the requirements provided in the law. Under the proposed change, a foreign corporation’s 50 percent interest in the LLC will be transferred to the remaining member, a New York State resident individual, who will then own 100 percent of the LLC. The LLC’s business will continue to operate after the proposed transfer in the same manner as it did before the transfer. The Department stated that if the LLC continues to be certified by DED after the transfer and meets the employment test under N.Y. Tax Law § 14(b)(4), it will be eligible to claim the qualified EZ enterprise tax credits for the remainder of its benefit period, provided it meets the other credit requirements in the tax law. New York Advisory Opinion No. TSB-A-13(1)C, (Jan. 8, 2013); New York Advisory Opinion No. TSB-A-13(2)I (Jan.8, 2013).
Co-author - Patrick Smith, Director Baker Tilly Virchow Krause, LLP
Mr. Ely is a partner and Messrs. Thistle and Rhyne are associates with the multistate law firm of Bradley Arant Boult Cummings LLP in its Birmingham, Alabama office. Mr. Ely is Chair of the firm’s State & Local Tax Practice Group. Messrs. Ely, Thistle, and Rhyne co-author a chapter on the state taxation of PTEs in the treatise “Keatinge, Conaway and Ely on Choice of Business Entity” (West). Mr. Smith is the Tax Director at Baker Tilly Virchow Krause, LLP and is head of State & Local Tax Services for the firm’s Chicago office. Mr. Smith is a co-author of “State Taxation of Pass-Through Entities and Their Owners,” a treatise published by Warren Gorham and Lamont/West since 2005. Messrs. Ely and Smith have co-presented on this topic at NYU’s Institute on Federal Taxation, as have Messrs. Thistle and Smith for a webinar hosted by Strafford Publications in early June.