Income/Franchise:
New York: Single-Purpose Investment Entity is Excludable from Affiliates’ Combined Return
Determination DTA No. 829540, N.Y. Div. of Tax App., ALJ Div. (7/27/23). An administrative law judge (ALJ) with the New York Division of Tax Appeals held that an Article 9-A corporate franchise tax combined filing group (the “taxpayer”) could exclude an affiliated single-purpose investment entity (the “subsidiary”) that was formed to hold only one asset (i.e., a 50% partnership interest in a Pennsylvania partnership that owned a mall in Pennsylvania) from its combined return because during the prior tax years at issue (i.e., the tax years ended June 30, 2008, and June 30, 2009), the facts showed:
There were not any substantial intercorporate transactions between the taxpayer and the subsidiary;
The taxpayer and the subsidiary were not engaged in a unitary business; and
Inclusion of the subsidiary in the taxpayer’s New York combined reports would result in distortion.
Accordingly, the ALJ held that the taxpayer correctly excluded the subsidiary from the New York combined reports that it filed for the tax years ended June 30, 2008, and June 30, 2009, and the New York Division of Taxation’s determination to include the subsidiary in the taxpayer’s combined returns for such years was improper. Please contact us with any questions.
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