Tax Committee Update
October 3, 2012

Combined Rule Reporting

The New York Department of Taxation and Finance has proposed a rulemaking that places into regulation, and expands upon, provisions of its 2008 technical guidance memo, TSB-M-08(2)C, addressing combined reporting under the state's Article 9A corporate franchise tax and Article 33 insurance tax, and setting forth its infamous “10 step test.” The Department's policy set forth in TSB-M-08(2)C is based on 2007 legislation, S.2110-C/A.4310-C, Part J, which mandated combined reports for related corporations with “substantial intercorporate transactions.”

This proposed rule is subject to a 45 day public comment period, ending October 29, 2012.  The Business Council will be submitting comments on this proposed rule, and welcomes your input.

Interestingly, in its “regulatory impact statement,” the Department cites comments received by The Business Council and the state Bar Association in response to draft regulations. This initial draft rule was circulated for informal comment back in October 2008, and has been sitting dormant since that time. With input from our tax committee members, The Business Council submitted comments on both the proposed “M” and the draft regulation; recommendations that were generally dismissed by the Department in both instances. Our prior comments on the draft rule are available here. 

The proposed regulation mostly amends to 20 NYCRR Subpart 6-2, which are the Department's existing regulations regarding combined reports. The proposed rule includes both elements of pre-existing regulatory provisions governing combined reports for unitary business, and the 2007 statutory mandate for combined reports. As such, the proposed rules include provisions from TSB-M-08(2)C, as well as pre-existing provisions unrelated to the 2007 legislation. In addition, the proposed rule includes a new 20 NYCRR Part 33, which would adopt similar mandatory combined reporting rules under the Insurance Tax.

The official State Register notice of this rulemaking is available here (see page 14+); the text of the proposed rule, and related rulemaking documents, including the Department's regulatory impact statement, are all available online here.

Note that the Department's earlier draft legislation to merge and modify Articles 9-A and 32 would have also repealed the 2007 statutory language mandating combined reports based on “substantial intercorporate transaction,” and instead required combined reports based on a stock ownership and unitary business test.  

I look forward to discussing this proposal with you at your convenience.