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Legislative Memo

BILL:

S.6335 (Farley)/A.9311 (Silver)

  Support

SUBJECT:

REIT Technical Amendment

 

DATE:

June 18, 2007

 

The Business Council supports this legislation and recommends its approval by the state legislature.

This bill address a technical error in Chapter 60 -- the revenue Article VII bill adopted as part of the FY 2008 budget -- which would, in certain circumstances, result in unintended double taxation of income from real estate investment trusts and regulated investment companies

Chapter 60 made a number of amendments to state tax law relative to REITs and RICs which are subsidiaries of New York State corporate taxpayers. The intent of the new law was to ensure that the income generated by any such "captive" entities was taxed by New York State.

However, due to a drafting error, if a group of banking corporations taxed under Article 32 also has in the group an Article 9-A taxpayer, then the group's captive REITs and RICs could be subject to the Article 9-A rule, with the consequence that the income of the REIT or RIC would be taxed once and then 40% of that income would be re-taxed.

The current legislation addresses this problem by subjecting these entities to tax treatment under Article 32 rule, and not Article 9-A , if the REIT or RIC is owned, directly or indirectly, by a bank holding company or a banking corporation subject to taxation under section 1451 of the tax law.

For this reason, the Business Council supports this legislation, and urges its adoption.