On the heels of its loss in Matter of TransCanada Facility USA, Inc. DTA NO. 827332, on May 14, the New York State Department of Taxation and Finance proposed draft regulations addressing the Article 9-A Franchise Tax treatment of Qualified New York Manufacturers (“QNYMs”). These draft regulations, which are not currently in effect but which do shed light on the Department’s current thinking, amplify a position that the Department has taken in prior informal guidance and on audit regarding contract manufacturing arrangements and the scope of activities that constitute “manufacturing” that is not in the statute. The position that a taxpayer that engages in contract manufacturing cannot qualify as a QNYM is contrary to prior New York authorities addressing “manufacturing” in the investment tax credit context and contrary to judicial authorities defining “manufacturing” under relevant federal tax law. In addition, the draft regulations set out a new position—again, one not found in the statute—that “digital manufacturing” is not manufacturing, and that only manufacturing that results in the production of “tangible” goods will qualify for QNYM treatment.
Continuing the unpleasant theme of aggressive state tax proposals, a bill has surfaced in the New York Assembly (following a companion bill that was introduced in the New York Senate last Spring) that seeks to impose a five percent tax on the “gross income . . . [from] every corporation that derives income from the data individuals of this state share with such corporations.” The new data tax is being proposed for inclusion in Section…
On February 15, 2018, New York Governor Andrew M. Cuomo released 30-day amendments to the State’s FY 2019 Executive Budget. The amendments contain several noteworthy tax provisions that, if enacted, would amount to a sweeping overhaul to portions of the New York Tax Law and could benefit many New York taxpayers. Included in the amendments are provisions that would (1) create an optional employer compensation expense tax, (2) establish a state-run charitable trust fund for the benefit of New Yorkers, and (3) decouple from several Internal Revenue Code provisions. While a proposal to pursue an unincorporated business tax was included in the “Summary of Proposed Tax Reforms” released by the Governor’s office, details of the proposal were not included in the amendments. The revenue proposals contained in the 30-day amendments are largely intended to address the adverse impact of the individual $10,000 state and local tax (“SALT”) deduction cap that was enacted as part of the federal Tax Cuts and Jobs Act of 2017 (the “TCJA”).
The New York State Department of Taxation and Finance (“Department”) has been releasing draft regulations to implement the extensive corporate franchise (income) tax reform that is generally effective for tax years beginning on or after January 1, 2015. Prior coverage can be found here. Recently, the Department issued new draft apportionment regulations on certain statutory categories of receipts, including receipts from sales of tangible personal property, rents and royalties, qualified financial instruments, loans, reverse repurchase agreements and securities borrowing agreements, commodities, marked to market net gains, other financial instruments, credit card and similar activities, credit card processors, services to investment companies, railroad, trucking and omnibus businesses, and advertising.