This past month, the Department of Taxation and Finance made several important additions to its FAQs on Article 9-A Corporate Tax Reform, which appear on the Department’s website. They include the following:
- Combined returns where the capital stock requirement is met for only part of the year. Unitary corporations are included in a combined return only during the portion of the year for which the more than 50% capital stock requirement for combination is met. The FAQs now include an example where a parent corporation sells its entire 60% interest in a unitary subsidiary in mid-2015, and the example provides that the parent must include that subsidiary in its combined return only for the period through mid-2015, not for the entire year.
- Capital base for captive REITs, captive RICs or combinable captive insurers. The capital of a captive real estate investment trust, captive regulated investment company or combinable captive insurance company is included in the computation of a combined group’s capital base. The FAQ does not discuss the computation of the combined capital base.
- Deriving New York receipts. A non-New York bank that has interest income solely from federal funds sourced to the State under the mandatory 8% sourcing rules for certain types of receipts and net gains, and that otherwise does not “derive receipts” in the State, will not have economic nexus with the State on that basis. This is consistent with informal guidance previously provided by the Department that the mandatory 8% sourcing provisions are not alone a basis for a finding of economic nexus.
- Unavailability of certain tax forms. For New York State partnerships with corporate partners, in the absence of new Forms IT-204.1 (NY Corporate Partners’ Schedule K) and IT-204-CP (NY Corporate Partner’s Schedule K-1) – the release of which has been delayed – where a partnership with a short 2015 tax year has a 5-month extension that is about to expire, if the tax forms are not yet available before the extended due date, the partnership will automatically be given an extension of 90 days after the forms become available, and no penalties will be imposed in those instances. The FAQ does not discuss how the affected corporate partner obtains an extension.