The New York Department of Taxation and Finance is requiring combined reporting by taxpayers engaged in a unitary business for tax years beginning on or after January 1, 2007. Until recently, much of the guidance surrounding the combined reporting requirements was in the form of technical memoranda and other departmental interpretations. However, with the adoption of amendments to the corporation franchise tax regulations, taxpayers now have administrative authority to which they can refer when determining whether or not they are subject to combined reporting.
Although the regulations are in many ways very similar to and extensions of the original guidance, there are several notable changes that taxpayers should be aware of including, but not limited, to:
- Implementation of a unitary business requirement for mandatory combined reporting when substantial intercorporate transactions take place.
- Inclusion of interest paid on intercompany loans in the determination of substantial intercorporate transactions.
- Exclusion of taxes paid or reimbursed, by or for a related entity, in the determination of substantial intercorporate transactions.
- Exclusion of allocated accounting, legal and similar services, in the determination of substantial intercorporate transactions.
- Implementation of several tests with regard to asset transfers in the determination of substantial intercorporate transactions.
- Exclusion of New York S corporations, non-New York taxpayer federal S corporations and corporations organized under the laws of a country other than the United States from the entities to be included in a combined report with entities that are treated as C corporations.
- All corporations included in the combined report group need not have the same accounting period.
Navigating the New York State income and franchise tax filing requirements for out-of-state companies is a daunting task. For more information on the amended regulations, or if you find yourself questioning your current and/or past filing methodologies, please contact a member of our State And Local Tax (SALT) team for assistance.
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