Fair, Efficient, Transparent, Exceptional Customer Service

THE CITY OF NEW YORK

DEPARTMENT OF FINANCE

BILL DE BLASIO, MAYOR

JACQUES JIHA, COMMISSIONER

TAX REPRESENTATIVES AND

PRACTITIONERS PROGRAM

OCTOBER 19, 2015

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Taxpayer Representatives and Practitioners Program (TAXRAPP)

New York Athletic Club 180 Central Park South New York, NY 10019

Monday, October 19, 2015

Event Program

7:30 - 8:30 REGISTRATION AND CONTINENTAL BREAKFAST

8:30 - 9:00 WELCOME AND INTRODUCTIONS

Jacques Jiha, Ph.D., Commissioner New York City Department of Finance

Jerry Boone, Commissioner New York State Department of Taxation and Finance

9:00 - 9:50 TRANSPARENCY IN THE AUDIT PROCESS

The Department of Finance has undergone a significant shift toward a more transparent business model that makes tax-related information and data, Agency budgeting and spending publicly available to New York City residents. For tax practitioners, that means making sure that our rules, policies, and statements of audit procedure and other written policies are clear and easy to understand. Our goal is to become more transparent in all of our business practices. This panel outlines the major steps we’ve implemented, and provides an overview of our ongoing initiatives.

Moderator:

Richard Genetelli, President The Genetelli Consulting Group Panelists:

Harry Leonard, Esq., Deputy Commissioner, Tax Audit & Enforcement New York City Department of Finance

Diana Beinart, Esq., Deputy Commissioner and General Counsel New York City Department of Finance

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Cesar Bencosme, Assistant Commissioner, Tax Audit New York City Department of Finance

9:55 - 10:50 NEW YORK CITY CORPORATE TAX REFORM:

AN ESSENTIAL PRIMER FOR TAX PRACTITIONERS

New York City’s Corporate Income Tax has been significantly reformed and is in effect for tax years beginning on or after January 1, 2015. The City’s new Corporate Tax structure streamlines and modernizes the taxation of C-Corporations doing business in the City, and conforms to changes enacted to New York State’s Franchise Tax in 2014. Leading experts will outline the benefits and changes for the business community and how the new tax rates for small businesses and manufacturers can help your clients grow their businesses.

Moderator:

Michael Hyman, First Deputy Commissioner New York City Department of Finance

Panelists:

Zal Kumar, Esq., Director, Office of Taxpayer Services New York City Department of Finance

Deborah Liebman, Esq., Deputy Counsel New York State Department of Taxation and Finance

Andrew Eisner, Esq., Director of Tax Law, Office of Legal Affairs New York City Department of Finance

Peter Faber, Esq. McDermott Will & Emery, LLP Michael Goldsmith, Esq. Ernst & Young, LLP Lance Rothenberg, Esq. Hodgson Russ, LLP Kenneth Zemsky, Esq. Anderson Tax

10:50 - 11:05 BREAK

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11:05 - 12:00 HOW, WHEN AND WHERE TO CHALLENGE A NEW YORK CITY BUSINESS OR EXCISE TAX ASSESSMENT

This panel will take a comprehensive look at the procedural rules and practices governing the various forums for challenging New York City business and excise tax assessments. Know what to expect at the Audit Exit Conference. Hear directly from the Director of the Conciliations Bureau and the President of the New York City Tax Appeals Tribunal as they, along with leading practitioners, provide tips on how to effectively represent your clients.

Moderator:

Maria T. Jones, Esq. Kramer Levin Naftalis & Frankel, LLP

Panelists:

Michael Newmark, Esq. Director of Tax Advocacy and Resolution New York City Department of Finance Duncan Riley, Director, Conciliations Bureau New York City Department of Finance

Ellen Hoffman, Esq., President New York City Tax Appeals Tribunal and New York City Tax Commission Leah Robinson, Esq. Sutherland Asbill & Brennan

12:15 – 1:30 LUNCH AND KEYNOTE ADDRESS

Nina E. Olson, Internal Revenue Service National Taxpayer Advocate

“The Role of the Taxpayer Advocate in Bringing Transparency and Accountability to Revenue Departments”

1:40 - 3:00 THE NEW FACE OF FINANCE: A CUSTOMER-CENTRIC BUSINESS MODEL

The Department of Finance has a brand new business model focused on providing exceptional service and improved experiences for our customers. This panel will explore the new initiatives already in place that are enhancing our professional services. They include helping customers navigate the City’s tax policies and procedures. Hear from the

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first-ever New York City Taxpayer Advocate, responsible for assisting taxpayers in navigating tax procedures and identifying systemic issues; and the Director of the newly established Department of Taxpayer Services, who will serve as an intermediary between the Department of Finance and tax professionals, ensuring that the business and excise tax policies of the Agency are clearly communicated. We will also discuss how we are leveraging technology to enhance our services and business relationship with you. Have questions on recent improvements in payment processing and E-Services? We’ve got answers.

Moderator:

Jeffrey Shear, Deputy Commissioner for Treasury and Payment Services New York City Department of Finance

Panelists:

Samara Karasyk, Assistant Commissioner for External Affairs New York City Department of Finance

Diana Leyden, Esq., New York City Taxpayer Advocate New York City Department of Finance, Office of the Taxpayer Advocate

Zal Kumar, Esq., Director, Office of Taxpayer Services New York City Department of Finance

Leslie Zimmerman, Assistant Commissioner for Payment Services New York City Department of Finance

3:00 - 3:15 BREAK

3:15 - 3:45 COMING INTO COMPLIANCE: REPRESENTING TAXPAYERS IN VOLUNTARY DISCLOSURE PROGRAMS

Representing non-filers and others who wish to come into compliance raises a number of practical and ethical considerations for practitioners. This panel will address factors to consider when counseling clients to come forward.

Moderator:

Kate Trachtenberg, Esq., Deputy Director New York City Department of Finance, Office of Legal Affairs

Panelists:

Sam Blaize, Director, Voluntary Disclosure Compliance Program New York City Department of Finance

David Schmutter, Esq. Ernst & Young

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Barry Horowitz Withum Smith & Brown, P.C.

3:45 - 4:45 CASE STUDIES: THE APPLICATION AND IMPACT OF RECENT COURT DECISIONS

Leading New York City and State tax experts will present recent court decisions affecting state and local tax law and discuss how these important decisions are being interpreted and applied.

Moderator:

Glenn Newman, Esq., Greenberg Taurig, LLP - Past President, New York City Tax Appeals Tribunal and New York City Tax Commission

Panelists:

John Mulligan, Senior Tax Counsel, Office of Legal Affairs New York City Department of Finance

Tim Noonan, Esq. Hodgson Russ, LLP.

Amy Nogid, Esq. Sutherland Asbill & Brennan, LLP

4:45 - 5:00 CLOSING REMARKS

Commissioner Jacques Jiha, Ph.D. Commissioner, New York City Department of Finance

Kathryn Wylde, CEO and President The Partnership for New York City

5:00 - 6:30 WINE AND CHEESE RECEPTION

KEYNOTE SPEAKERS

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Jacques Jiha, Ph.D., Commissioner of Finance for New York City Jacques Jiha is the New York City Commissioner of Finance, in charge of administering the City’s tax and revenue laws, collecting $33 billion in revenue and valuing more than one million properties worth about $1 trillion. He oversees the City’s treasury, advises the Mayor on the City’s $160 billion pension system and $15 billion deferred compensation plan, and serves as trustee of the New York City Employees’ Retirement System, the Teachers’ Retirement System of the City of New York, the New York City Police Pension Fund and the New York City Fire Department Pension Fund. He also oversees the Sheriff Department that acts as the City's chief civil law enforcement officer, and serves on a number of government boards, including the New York City Taxi & Limousine Commission, the New York City Housing Development Corporation and the Banking Commission. Before being named Commissioner, Mr. Jiha was the Executive Vice President/Chief Operating Officer & Chief Financial Officer of Earl G. Graves, Ltd., a multi-media company with properties in print, digital media, television, events and the Internet. Previously, he served as Deputy Comptroller for Pension Investment and Public Finance in the Office of the New York State Comptroller. As the state’s chief investment officer, he managed the assets of the New York State Common Retirement Fund – then the nation’s second-largest pension fund valued at $120 billion. He also oversaw the New York State’s College Savings Program and short-term investment pool. He had decision-making responsibilities in all aspects of investment strategy, including asset allocation, as well as investment program in domestic and international equity, fixed income, real estate and private equity. His role also included oversight responsibility of investment operations, including management of a professional investment staff, external investment managers, private-equity and real estate general partners and investment consultants. In the public finance arena, Mr. Jiha was in charge of all activities related to the issuance of New York State general obligation bonds, bond anticipation notes, tax and revenue anticipation notes and certificates of participation. In addition, he reviewed and approved the terms and conditions of all private or negotiated sales of bonds undertaken by public authorities and localities throughout the state of New York. Mr. Jiha was also the Co-Executive Director of the New York State Local Government Assistance Corporation (LGAC). In that capacity, he managed all aspects of LGAC operations, including the refunding bonds, the ratification of swaps agreements and the selection of financial advisors and auditors. Mr. Jiha previously served as Nassau County Deputy Comptroller for Audits and Finances, in charge of monitoring and auditing all aspects of the county’s budget and finances, including the Nassau County Health Care Corporation and Nassau Community College. Prior to this appointment, he worked for the New York City Office of the Comptroller in increasingly responsible positions: first as Chief Economist and later as Deputy Comptroller for Budget, with oversight responsibilities over the city’s operating budget and four-year capital plan. Mr. Jiha also served as Executive Director of the Legislative Tax Study

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Commission of New York State and as Principal Economist for the New York State Assembly Committee on Ways and Means. A staunch advocate of public service, Mr. Jiha served on a number of government and not-for-profit boards. He was a board member of the Ronald McDonald House of New York, a board member of Public Health Solutions and a trustee of the Public Health Solutions Retirement Trust, a member of the Investment Advisory Committee of the New York Common Retirement Fund, and he was also the Secretary of the board of the New York State Dormitory Authority – one the largest issuers of municipal debt in the country on behalf of public and private universities and medical institutions, and the State of New York. He also served on the board of the Haitian American United for Progress, the National Coalition for Haitian Refugees, the Haitian Times and the Haitian Roundtable. Mr. Jiha holds a Ph.D. and a master’s degree in economics from The New School for Social Research and a bachelor’s degree in Economics from Fordham University. He served as an adjunct professor of macroeconomics at the New School’s Robert J. Milano Graduate School of Management and Urban Policy, and as an adjunct professor of economics and statistics at the Long Island University. He is the author and co-author of many academic papers, including “A Note on Inflation in Haiti: Evidence from Co-integration Analysis” in Social and Economic Studies, March 1995; “The Growth and Stability Trade Off: An Application of the Markowitz Portfolio Theory to the New York City Employment Mix” in Research in Public Policy Analysis and Management (JAI Press, 1998); and “Misguided Policies and Economic Underdevelopment: A Case Study of Haiti, 1970-89,” Papers on Latin America # 41, The Institute of Latin American and Iberian Studies: Columbia University, 1996. A frequent public speaker, Mr. Jiha has been quoted extensively in the Economist, The New York Times, The New York Daily News, The New York Post, New York Newsday, Crain’s New York Business and the Bond Buyers. He is listed in Who’s Who in the World, Who’s Who in America, and in Who’s Who in Finance and Industry. He is one of the 2014 Honorees of the Carnegie Corporation of New York’s “Immigrants: The Pride of America.” He is also the recipient of numerous awards and honors for his achievements, leadership, and community services, including Manhattan Borough President Special Recognition Award, the Vice Chancellor’s Achievement Award from the American Foundation for the University of the West Indies, the Outstanding Achievement Award from The Haitian American Alliance and the Haitian American United for Progress Achievement Award.

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Jerry Boone, Commissioner of Finance for New York State Jerry Boone was confirmed as the New York State Commissioner of Taxation and Finance on June 16, 2015. Commissioner Boone brings to the Tax Department a distinguished career in government and business, complemented by a passion for executive leadership and workforce management. Most recently, Mr. Boone served for three years as President of the New York State Civil Service Commission and Commissioner of the Department of Civil Service. There he oversaw merit administration, civil service workforce policy, and health benefits for the 153,000-person New York State executive workforce.

Mr. Boone's career in New York State government began in the Attorney General's Office as an Assistant Attorney General handling a wide range of litigation. He went on to lead real estate transactions and litigation in the Real Property Bureau, and ultimately was appointed Solicitor General — the State's chief appellate lawyer, litigation manager, and public finance bond counsel. In the private sector, Mr. Boone was corporate in-house counsel and risk compliance officer in a leading gaming and hospitality company. He was involved in many facets of the gaming industry, including private-public partnerships for workforce development, economic development investment, and incubators for small business start-up. His operations experience included leading casino operations for the largest casino in Louisiana, and workforce management and internal communications for a Fortune 500 gaming and hospitality company of 85,000 employees. Mr. Boone also has a background in creating affordable housing for first-time homebuyers and tenants. His company focused on the acquisition and rehabilitation of distressed properties to develop quality, affordable housing for sale or rental to lower- to middle-income households. Mr. Boone earned a B.A. from Columbia University and a law degree from Boston College Law School. He resides in Rensselaer County with his wife, Dr. Janice Pride-Boone. They have two adult sons and a teenage daughter.

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Nina Olson, the National Taxpayer Advocate (NTA)

Nina E. Olson, the National Taxpayer Advocate (NTA), is the voice of the taxpayer within the IRS and before Congress. She leads the Taxpayer Advocate Service (TAS), an independent organization inside the IRS that helps taxpayers resolve problems and works for systemic change to mitigate problems experienced by groups of taxpayers.

Throughout her career, Ms. Olson has advocated for the rights of taxpayers and for greater fairness and less complexity in the tax system. In calling for fundamental reform in 2012, she wrote, “A simpler, more transparent tax code will substantially reduce the estimated 6.1 billion hours and $168 billion that taxpayers spend on return preparation” and “reduce the likelihood that sophisticated taxpayers can exploit arcane provisions to avoid paying their fair share of tax.”

Ms. Olson was appointed to the position of National Taxpayer Advocate in January 2001. Under her leadership, the NTA’s Annual Report to Congress has become an important vehicle for change. It is one of two reports the NTA is required by statute to deliver each year, and outlines the most serious problems facing taxpayers. The IRS has implemented hundreds of recommendations she has made for administrative change. Members of Congress have introduced bills to implement dozens of her recommendations for legislative change, and 15 of them have been enacted into law. In June 2014, the IRS adopted the Taxpayer Bill of Rights for which Ms. Olson had long advocated, grouping dozens of existing rights in the Internal Revenue Code into ten broad categories of rights, thereby making them clear, understandable, and accessible for taxpayers and IRS employees alike.

Ms. Olson is a member of the American College of Tax Counsel and delivered the group's prestigious Griswold Lecture in January 2010. More recently, she gave the 2013 Woodworth Lecture, sponsored by Pettit College of Law at Ohio Northern University. The non-profit Tax Foundation selected her to receive its Public Sector Distinguished Service Award in 2007. Money magazine named her one of 12 "Class Acts of 2004," and Accounting Today magazine has named her one of its Top 100 Most Influential People in the accounting profession each year since 2004.

Prior to her appointment as the NTA, Ms. Olson founded and served as Executive Director of The Community Tax Law Project, the first independent § 501(c)(3) low-income taxpayer clinic in the United States. From 1975 until 1991, she owned a tax planning and preparation firm in Chapel Hill, North Carolina.

An attorney licensed in Virginia and North Carolina, Ms. Olson served as the chair of the American Bar Association (ABA) Section of Taxation’s Low Income Taxpayers Committee as well as the Pro Se/Pro

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Bono Task Force of the ABA Section of Taxation's Court Procedure Committee. She is the 1999 recipient of both the Virginia Bar Association's Pro Bono Publico Award and the City of Richmond Bar Association's Pro Bono Award. Ms. Olson graduated from Bryn Mawr College, cum laude, with an A.B. in Fine Arts. She received her J.D., cum laude, from North Carolina Central School of Law and her Master of Laws in Taxation, with distinction, from Georgetown University Law Center. Ms. Olson has served as an adjunct professor at several law schools.

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Kathryn Wylde, President & CEO of the Partnership for New York City

Kathryn Wylde is President and CEO of the nonprofit Partnership for New York City, the City’s leading business organization. Its mission is to work with government, labor, and the civic sector to build a stronger New York, with a focus on education, infrastructure and the economy.

Prior to taking over the Partnership presidency in 2001, Ms. Wylde was the founding CEO of both the Partnership’s housing and investment fund affiliates. She was responsible for developing and managing affordable housing and economic development programs that contributed to the renaissance of blighted urban neighborhoods across the five boroughs. With the investment fund, she developed a network of business leaders and investors that nurtured the growth of the city’s “innovation economy,” creating thousands of jobs and promoting entrepreneurial business initiatives across the five boroughs.

During her tenure as CEO, the Partnership has played a prominent role in advocacy for mayoral control of the public school system and other education reforms, blueprints for new city and state economic development policies and programs, economic analyses that guided the city’s recovery from the terrorist attacks of September 11, 2001, support for expanded investment in mass transit, and reforms of state fiscal and tax policies.

Ms. Wylde is an internationally known expert in housing, economic development and urban policy. She has received honorary degrees from Fordham University and St. Francis College and serves on a number of boards and advisory groups, including NYC Economic Development Corporation, NYC & Company, The Fund for Public Schools, US Trust Advisory Committee, the Manhattan Institute, the Lutheran Medical Center, the Governor’s NYC Regional Economic Development Council and the Council of Urban Professionals. She has authored numerous articles and policy papers and has been recognized for her leadership by dozens of educational, professional and nonprofit institutions.

Prior to joining the Partnership, Ms. Wylde worked in senior positions at the former Anchor Savings Bank and at Lutheran Medical Center in Sunset Park, Brooklyn. Ms. Wylde is a native of Madison, Wisconsin, a graduate of St. Olaf College,’68, and resides in Brooklyn, New York.

MODERATORS & PANELISTS

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Diana Beinart, Esq. Diana Beinart is the Deputy Commissioner/General Counsel for the New York City Department of Finance. She is an experienced tax lawyer and CPA, who before her public sector career, represented individuals charged with tax crimes in Federal courts and resolved tax controversies and audits before the Internal Revenue Service and the District of Columbia Department of Tax and Revenue. Diana was also a prosecutor in the Department of Justice Tax Division where she led grand jury investigations and tried individuals charged with tax crimes and conspiracies. In her last position, Diana served as Special Assistant to the President and as an Associate Counsel in the White House Counsel’s Office, where she managed the White House vetting process for all Senate-confirmed presidential appointments, including cabinet secretaries, ambassadors, and Supreme Court Justices. She was also the President’s sole tax counsel representing the Executive Office of the President in legal and tax policy issues with the Office of Management and Budget, the Office of the Vice President, the Department of Treasury, the Internal Revenue Service, the Department of Justice, and other federal agencies. Diana graduated magna cum laude from the University of Maryland College Park with a Bachelor of Science in Accounting, and from Columbia University School of Law where she was a Harlan Fiske Stone Scholar. Cesar Bencosme Having spent more than 20 years practicing accounting in New York State and local tax areas, Cesar Bencosme is the Assistant Commissioner for the Tax Audit & Enforcement Division of the New York City Department of Finance. He currently oversees the management and directing of audit units responsible for conducting audits of multiple tax types. Prior to joining the Department, Cesar held various positions both in corporate and public accounting firms. He is a graduate of Lehman College and Baruch College, and is a member of both the American Institute of Certified Public Accountants and the New York State Society of Certified Public Accountants. Samuel Blaize Samuel Blaize has been with the New York City Department of Finance for 31 years, starting as a field auditor in the Unincorporated Business Tax Unit. He now serves as Senior Director in the Quality Analysis Group, which oversees the Voluntary Disclosure and Compliance Program. The unit also handles office audits of various tax types, filers and non-filers of Federal/State changes and delinquencies. Sam received both his B.S. and M.A. in Accounting from Brooklyn College. Andrew Eisner Andrew Eisner joined the New York City Department of Finance in 1983 and is now the Director of the Tax Law Division in Legal Affairs responsible for the drafting of legislation, regulations and letter rulings as well as other forms of guidance relating to the New York City Business and Excise taxes. Andrew received his J.D. and LL.M in Taxation from New York University School of Law. Peter L. Faber Peter L. Faber is a partner in the New York office of the law firm of McDermott, Will & Emery LLP, specializing in state and local tax matters, including planning, administrative proceedings, and litigation. Peter’s state and local tax practice has included tax planning for corporate acquisitions divestitures, and restructurings; combined reporting; electronic commerce nexus issues; cloud company issues; residence matters; alternative apportionments issues; and a variety of other matters. He has litigated many cases

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before state and local administrative agencies and courts and has represented companies and industry groups in legislative and regulatory matters. He is a member of the firm’s State and Local Tax Practice Group, that includes state and local tax specialists around the country and that, among other matters, successfully represented the taxpayers in the landmark Quill, and ASARCO, Woolworth matters before the United States Supreme Court. Peter has served as Chairman of the American Bar Association Section of Taxation and is a member of the Section’s Committee on State and Local Taxes. He is former Chairman of the New York State Bar Association Tax Section. Peter has served as a member of the Governor’s Council on Fiscal and Economic Priorities and as Chairman of the New York City Partnership’s Committee on Taxation and Public revenue. He served on the Board of Directors of the Partnership. He has served on the New York State Tax Reform Commission, the Governor’s Temporary Commission to Review the New York Sales and Use Tax Laws, and the New York State Legislature’s Tax Study Commission’s Policy and Advisory Group. He currently serves as a member of the Advisory Committees of the New York State Tax Appeals Tribunal, the New York City Tax Appeals Tribunal, the New York State Department of Taxation and Finance and the New York City Department of Finance. Peter has lectured on state and local taxation at the Georgetown University Institute on State and Local Taxation, the National Institute on State and Local taxation, the Committee on State Taxation (COST), the Hartman State and Local Tax Forum, the National Tax Association, The NYU Annual Institute on State and Local Taxation, the National Conference of State Tax Judges, the Multistate Tax Commission, and before many other professional groups. He is a member of the Advisory Committees of the Georgetown and NYU Institutes. He is the author of many articles on state and local taxation. Peter practiced law in Rochester for many years as a partner in Harter Secrest & Emery. Among other activities, he was a member of the Board of Rochester Area Chamber of Commerce and President of the Rochester Philharmonic Orchestra. Peter graduated from Swarthmore College with high honors and from Harvard Law School, cum laude.

Richard W. Genetelli Richard W. Genetelli founded the state and local tax consulting firm The Genetelli Consulting Group in 1991 after a 20-year career with Coopers & Lybrand (now PwC), 10 of which were as a partner. A member of New York State Society, American Institute of Certified Public Accountants, the New York Chamber of Commerce and Wall Street Tax Association, Richard also serves on the advisory boards of New York University, Bloomberg BNA Tax Management Inc. Multistate Tax Portfolio Series, Multistate Tax Analyst and the Journal of State Taxation. The author of numerous articles regarding state and local taxes for outlets such as Bloomberg BNA, the Financial Executive and Payroll Exchange, Richard regularly co-chairs the New York University School of Continuing and Professional Studies Institute on State and Local Taxation and has received a number of distinctions and honors including the Outstanding Achievement in State and Local Taxation Award from New York University (2011), the Franklin C. Latcham Award for Distinguished Service in State and Local Tax from BNA Tax & Accounting (2010), and the 25-Year Service Award from Pace University (2010). Richard is qualified as an expert witness and testifies on behalf of taxpayers litigating state and local tax issues throughout the country. A professor of graduate and undergraduate courses at the Pace University Lubin School of Business, he is also a frequent lecturer on state and local taxes throughout the country.

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Michael H. Goldsmith, Esq. A practicing tax consultant for more than 20 years, Michael H. Goldsmith was promoted to State and Local Tax principal of Ernst & Young LLP in 2001 and assumed the role of Northeast Region State and Local Tax Services Leader in 2009. As a specialist in this area, his multi-state experience covers a broad range of industries including manufacturing, professional services, financial services and technology. He also has extensive experience in the controversies area representing both high-net-worth individuals and corporations before various state taxing authorities and litigating before the California Franchise Tax Board, New York State Division of Tax Appeals, Florida Administrative Law Judge Unit and Pennsylvania Board of Appeals. Michael has authored several articles on state taxation for outlets that include, State Tax Notes and New York Law Journal. Additionally, he has spoken at TEI’s Northeast regional meeting in New Jersey. He is a former board member of Think or Swim NVESTools and currently serves on the Board of Directors of The Moriah School in Englewood, New Jersey. Michael is a graduate of Queens College and received his J.D. from St. John’s University School of Law and received his LL.M. in Taxation from New York University School of Law Ellen Hoffman, Esq. Ellen Hoffman was appointed President of the Tax Commission and Tax Appeals Tribunal in August 2015. She also serves as Director of the Office of Administrative Tax Appeals, the umbrella agency comprising the Tax Commission and Tax Appeals Tribunal. Appointed as a Commissioner of the New York City Tax Appeals Tribunal in 2005, she also spent 16 years with the New York City Department of Finance Office of Legal Affairs. As Assistant Commissioner for Tax Law and Conciliations, Ellen oversaw private rulings, regulations, forms review and development and legislative drafting as well as the Department of Finance Conciliation Bureau. Prior to joining the Department of Finance, she spent 11 years in private tax practice in New York City. She holds a J.D. and LL.M in Taxation from New York University School of Law. Barry H. Horowitz A CPA with more than 30 years of professional accounting experience, Barry Horowitz is located in WithumSmith+Brown’s New York office and is the Team Leader of the firm’s Tax Services State and Local Tax Team. Barry advises clients in residency and nexus issues, entity level taxes, sales and use taxes, and other business and personal tax matters. He also counsels clients in strategic planning, transaction reviews, risk assessment, tax law compliance and corporate restructuring. Barry received his B.B.A. with honors in Accounting and his M.S. degree in Taxation from Baruch College, New York City. As an active member of the New York and New Jersey State Societies of Certified Public Accountants, Barry often lectures and leads learning sessions on key state and local tax issues to local chapters and other organizations, including Baruch College and C.W. Post College of Long Island University. He is a current member of the NYSSCPA’s Multistate & Local Taxation Committee and served as chairman in prior years. He is also a member of the NJSCPA's New Jersey Tax Committee. Prior to joining WS+B, Barry was a partner with EisnerLubin, LLP. Michael Hyman Michael Hyman has served as the First Deputy Commissioner of the New York City Department of Finance since January 2015. He has been with the Department since 1988 and has served as Deputy Commissioner for the Tax Policy & Planning Division, which included the Offices of Tax Audit, Property

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Valuation and Tax Policy, and as Deputy Commissioner for Tax Audit, Policy and Enforcement. Michael has been involved in major tax reform projects for the City of New York, including NYC’s 2015 corporate tax reform legislation. He has also been a lead manager in the introduction of data-based strategies for tax audit and property valuation work conducted by the Agency and has made numerous presentations on tax policy and tax administration issues to groups such as the Federation of Tax Administrators, the Multi-State Tax Commission, the Partnership for New York City, the United States Conference of Mayors, the New York State Bar Association, the New York City Bar Association and similar groups. Prior to joining the Department of Finance, Michael was an academic and wrote on historical topics involving U.S. public policy issues, including tax policy. He has a Ph.D. in History from the Graduate Center of the City University of New York. Maria T. Jones, Esq. A partner at Kramer Levin Naftalis & Frankel LLP, Maria T. Jones is a leading practitioner in the field of state and local tax matters and heads the firm’s state and local tax practice, advising corporate clients, banks and financial service business in multistate planning and in areas that include combination, allocation, sourcing and classification of income among states, treatment of losses, taxability of activities, questions of nexus and application of the Commerce Clause of the U.S. Constitution to state and local taxes. In addition, she advises high-net-worth individuals on issues relating to state of domicile or residence for tax purposes, allocation and characterization of income, and appraisal of charitable donations. Prior to moving into private practice, Maria was appointed Commissioner of the New York State Tax Appeals Tribunal by Governor Mario Cuomo in 1989. As one of the original Commissioners to adjudicate taxpayer disputes, she helped craft many of the legal interpretations now being applied in the state tax area. Before serving on the Tribunal, she was Deputy Commissioner for Legal Affairs for the New York City Department of Finance, where she advised the Commissioner on legal and policy issues and supervised a staff of 30 attorneys. She has received numerous honors and distinctions, including being elected a Fellow of the American College of Tax Counsel in 2014. Both Chambers USA and Legal 500 have repeatedly ranked her as a leading practitioner. In 2015, Chambers designated her in Band 2 for Tax (New York) and International Tax Review designated her as a leading advisor for tax controversy. Best Lawyers in America named her Lawyer of the Year for Litigation and Controversy in Tax. Turnarounds & Workouts listed her on their "Bankruptcy Tax Specialists in the Nation’s Major Law Firms" (2011-2014). She was also named as one of New York’s "Women Leaders in the Law" in 2013; and Avenue magazine’s "Top Women Lawyers” in 2011. Samara Karasyk Samara Karasyk is the Assistant Commissioner of External Affairs for the New York City Department of Finance and has served in this role since August 2011. Prior to joining the Agency, she worked at the New York City Department of Transportation, the NYC Taxi & Limousine Commission, and the New York City Department of Parks & Recreation. Earlier in her career, Samara taught 3rd grade in Bogota, Colombia at a bilingual private school before joining City service, where she has developed a passion for helping New Yorkers navigate government services and programs. She holds a B.A. in International Relations and Hispanic Studies from Brown University and a Master of Public Administration from Columbia University’s School of International and Public Affairs. She loves living in Brooklyn with her family and considers herself extremely fortunate that her commute is a daily walk over the Brooklyn Bridge.

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Zal Kumar, Esq. Zal Kumar is the inaugural Director of Taxpayer Services for the New York City Department of Finance. In this capacity, he is responsible for supporting special legislative, regulatory and compliance initiatives as well as drafting and publishing technical memoranda, notices, publications, and audit policies and procedures. He also maintains the channel of communications with practitioners regarding the application of the City’s business income and excise taxes. In addition, Zal was a principal drafter of New York City’s 2015 corporate tax reform legislation. Prior to joining the Department of Finance, in 2013, as the Senior Counsel for the Audit Division, he was an attorney in private practice. Zal is a graduate of Vanderbilt University, where he received a Bachelor of Arts. He received his J.D. from George Washington University Law School and a Master of Laws from New York University School of Law. Harry Leonard, Esq. A tax practitioner with more than 30 years of corporate and professional services experience, Harry Leonard was appointed Deputy Commissioner of Tax Audit & Enforcement for the New York City Department of Finance January 2015. He previously was Assistant Commissioner of The Office of Tax Audit. For a significant part of Harry’s career his expertise has focused on state and local taxes, particularly multi-state strategic planning, mergers and acquisitions, audit defense and financial accounting. Harry served in various senior tax capacities at Prudential Securities, Inc., Deloitte & Touche, and a major commodities and financial instrument trading house, The Mocatta Group, Inc. before joining Citigroup, Inc. in 2001 as deputy tax director for state and local taxes, where he was involved in major acquisitions, dispositions, entity reorganizations, major audit settlements, representing Citigroup in strategic legislative matters in all states. By 2007, Harry was employed as state and local tax principal managing director at Bear Stearns, Inc. and its successor, JP Morgan/Chase, directing their state and local tax efforts. Before joining New York City government, Harry was a New York partner in the consultative tax practice of Alvarez & Marsal LLC, focused on bankruptcy and multi-state planning. He has had senior leadership roles in the Securities Industry Association, as well as in the New York Bankers Association, The Business Council of New York State, Inc., the Partnership for New York City, and the Council on State Taxation. He has also served as President of the Board of Education of the Lynbrook Union Free School District and other civic and charitable organizations. Diana Leyden, Esq. Diana Leyden joined the New York City Department of Finance to open and head the Office of the Taxpayer Advocate in July 2015. Her career in tax law began right after receiving her J.D. from University of Connecticut School of Law, when she served as a law clerk to The Hon. Herbert Chabot at the United States Tax Court. She later practiced corporate and tax exempt tax law with Steptoe & Johnson, LLP in Washington, D.C., as well as Powers & Hall and Day Pitney LLP, both in Boston, Massachusetts. In 1988, she took a position as an appeals officer and then as an appeals bureau manager in the Massachusetts Department of Revenue. After that, she worked as a staff attorney in the Connecticut Department of Revenue Services. Diana later, through a grant, created a low-income Taxpayer Clinic at University of Connecticut School of Law, which she ran for 16 years. In 2005, she was awarded the American Bar Association Section of Taxation Janet Spragens Pro Bono Award for her work on behalf of low-income taxpayers. Diana received a B.A. from Union College, and holds a Master of Laws from Georgetown University Law Center.

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Deborah Liebman, Esq. Deborah Liebman is Deputy Counsel in the Office of Counsel of the New York State Department of Taxation and Finance overseeing services for Legislation and Guidance, which include drafting legislation, budget bills and departmental proposals, responding to requests for legal advice from other divisions of the Department and governmental agencies, and preparing the advisory opinions requested by taxpayers. A graduate of Albany Law School and Binghamton University, Deborah is the recipient of the New York State Bar Association’s prestigious Excellence in Public Service award. John Mulligan, Esq. With professional experience that extends to public service and private practice, John Mulligan has been with the Legal Affairs Division of the New York City Department of Finance for more than 15 years. He is currently a Senior Tax Counsel. In this position John writes Department of Finance letter rulings and is involved with the drafting of Department rules, finance memoranda, and statements of audit procedure as well as legislation involving the Agency. He also represents the Agency in conciliation proceedings before the Department of Finance’s Conciliation Bureau. Early is his legal career, John served as a law clerk to the Honorable Stewart F. Hancock, Jr., Associate Judge of the New York Court of Appeals, where he was also an attorney with the Central Legal research staff. John received his J.D. from Pace University School of Law in 1988, his LL.M in Taxation from New York University School of Law in 1999 and was admitted to the New York Bar in 1988. Glenn Newman, Esq. Until his appointment as president of the Tax Commission, Glenn Newman was a partner in a tax law firm where he handled tax planning and matters involving state and local taxes, including personal income tax, corporate tax, sales tax and real property transfer taxes. He had already served as Deputy Commissioner for Audit & Enforcement at the New York City Department of Finance where he was responsible for developing tax policy and managing all aspects of the audit process, and was chief of the Tax and Bankruptcy Division in the Office of the Corporation Counsel of the City of New York where he drafted legislation and regulations and litigated matters involving both New York City and State taxes in administrative proceedings and in the courts. Glenn also handled scores of cases involving City taxes in federal courts, including the U.S. Bankruptcy Courts. A member of the Commissioners’ Advisory Panels for both the New York State and City tax departments, Glenn also served as chair of the State and Local Tax Committee of the Association of the Bar of the City of New York from 1999 to 2001. He wrote a regular column on New York tax appeals for the New York Law Journal from1996 to 2002, and is co-author of the New York Sales Tax Portfolio, published by the Bureau of National Affairs. In 2003, Glenn was appointed the inaugural President of the New York City Tax Appeals Tribunal, the body that reviews the City’s non-property tax determinations. He received the honor of “Tax Judge of the Year” in 2007 by the National Conference of State Tax Judges for which he became the Chair during the 2013/2014 term. In September, 2015, Glenn became a shareholder at the law firm of Greenberg Traurig in New York City. Glenn received his J.D. from Fordham University School of Law and undergraduate degree from University at Albany, State University of New York. Amy F. Nogid, Esq. Amy Nogid focuses all on stages of state and local tax – from multistate tax planning and restructuring through voluntary disclosures, as well as in audit defense, settlement and litigation as Counsel for

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Sutherland. She advocates for clients, ranging from Fortune 500 companies to startups involved in emerging technologies at the administrative, trial and appellate levels up to the U.S. Supreme Court. Her areas of tax expertise include income, franchise, sales and use, excise and other transaction-based taxes, with in-depth understanding of nexus (economic, affiliate and attributional), addback statutes, apportionment and sales tax issues related to emerging industries. She also advises industry-leading clients across the country in unclaimed property matters, such as the treatment of virtual payables, gift cards, un-cashed rebates and payroll cards. Her previous experience includes working as an assistant chief in the Tax and Bankruptcy Division of the New York City Law Department. Amy received her B.A. from Queens College, her J.D. from New York Law School and her LL.M from New York University School of Law. Timothy P. Noonan, Esq. A partner at Hodgson Russ LLP, Timothy P. Noonan heads the New York State Residency Practice for the firm and is one of the leading practitioners in the area of state and local tax. His area of specialty is New York State and New York City tax litigation and controversy, in which he has handled some of the most high-profile residency cases in New York over the past decade, including a 2014 win in the Gaied v New York State Tax Appeals Tribunal case – one of the first New York Residency cases to ever reach New York’s highest court. Over the past 16 years, Timothy has handled more than 700 personal income, sales, corporate, and other New York tax audits. He has also handled approximately 100 cases in New York’s Division of Tax Appeals. Timothy is a recognized speaker and author who has written over 100 articles contributing to several tax publications including the American Bar Association’s Sales and Use Tax Deskbook; the New York Sales Tax Guide, published by Practical Law; the corporate apportionment chapter in Thomson Reuters’ Checkpoint Analyst; and the New York chapter of LexisNexis’s Practice Insights. Timothy co-authored the 2014 edition of the CCH Residency and Allocation Audit Handbook and Contesting New York Tax Assessments, Fourth Edition, published by the New York State Bar Association and is often quoted by media outlets such as the Wall Street Journal, New York Times, and Forbes. His blog Noonan’s Notes Blog and monthly column “Noonan’s Notes” in Tax Analysts examines developments in New York and multistate tax law. His honors include being named to the 2013 and 2014 Upstate New York Super Lawyers “Rising Stars” lists and Business First's 2009 Who's Who in Law under the Tax category. Duncan D. Riley Duncan Riley is the Conciliation Bureau Director for the New York City Department of Finance, a position he’s held since the division’s inception in 1992. Before that, Duncan worked as Deputy Director of the Office of Technical Services in the Tax Policy Division, where he researched and responded to written and telephone inquiries from practitioners on all non-real property taxes administered by the Agency. He has also served as an Assistant Unit Manager in the Audit Training Group, in charge of classroom instruction and field training for all new audit staff in the General Corporation Tax group. Duncan holds a Bachelor of Science with high honors in Accounting and Finance from New York University.

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Leah Samit Robinson, Esq. Leah Samit Robinson has been a partner of Sutherland Asbill & Brennan LLP since August 2014. In that role, she advises public and private corporations on state and local tax planning, policy, controversy and litigation. Nationally recognized for her advocacy in tax disputes with New York State, New York City and New Jersey, she has represented clients in a wide range of industries providing national state tax strategies for clients on a full range of tax matters including nexus, income tax apportionment and combination planning, sales tax characterization of products, audit defense, controversy and litigation. She is the author of two columns published by State Tax Notes: “The Jersey Short – Everything You Need to Know about New Jersey Tax” and “In a New York Minute,” focusing on New York City and New York State issues. Leah is a frequent speaker at events hosted by the Council on State Taxation, the Institute for Professionals in Taxation, the Tax Executives Institute and other organizations. From 2004 to 2006, Leah worked as a tax attorney with the IRS Office of Chief Counsel in New York City where she was part of the strategic trial attorney litigation team handling the largest Section 482 transfer pricing controversy in history. She received her J.D. and LL.M from Rutgers University School of Law and has been the recipient of several awards and distinctions including being selected in the “Rising Stars” category of New York Metro Super Lawyers for two consecutive years. Lance E. Rothenberg, Esq. Lance E. Rothenberg is a Senior Associate with Hodgson Russ LLP with a focus in state and local tax controversy and planning. His experience includes assisting small and mid-size businesses as well as Fortune 100 companies and high-net-worth individuals facing a wide range of New York and multistate tax issues, including corporate income and franchise tax, sales and use tax, and personal income tax and residency audit issues. Lance represents clients in all phases of administrative audit and appeal, in collection proceedings, in voluntary disclosure matters, and in litigation in administrative and state courts. The author of numerous articles, Lance is also a frequent speaker on state and local tax topics and has received several honors of distinction including being listed as one of New York Metro Super Lawyers “Rising Stars” and receiving the Lura E. Turley Award for outstanding publication in American University Law Review. Lance received his undergraduate degree from George Washington University, a J.D. from American University’s Washington College of Law, and an LL.M from New York University School of Law. David Schmutter, Esq. David Schmutter is an Executive Director of Ernst & Young, LLP primarily in the New York metropolitan area. He has more than 30 years of public accounting experience working for regional and global firms and now provides a broad range of state and local tax client services such as tax research, due diligence, and planning to reduce the tax impact on various transactions such as business acquisitions and dispositions, expansions and relocations. In addition, he has represented numerous clients before various state and local taxing authorities for corporate income, personal income, and sales and use tax purposes. David has spoken at various conferences, was an adjunct professor at Fordham University's Masters of Tax program, and has been a contributor to publications that include the BNA Tax Management Weekly State Tax Report, The Secured Lender, Internet Tax Advisor, Bottom Line Business, Tax Hotline, Corporation Taxation Monthly, and others. David has an LL.M in Tax from New York University School of Law, a J.D. from New York Law School, a B.S. in accounting from Syracuse University, and is a New York State Certified Public Accountant.

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Jeffrey Shear Jeffrey Shear has established an extensive career serving the City of New York for 30 years in operations management and currently serving as the Deputy Commissioner of Treasury and Payment Services for New York City Department of Finance since September 2014. He is responsible for overseeing the Department’s Adjudications, Citywide Payments & Receivables Services, Collections, Land Records, Payment Operations and Treasury divisions. Jeffrey began his career in local government with the Department of Finance in 1985, working for the Audit and Enforcement Division. He also served as Chief of Staff to First Deputy Commissioner and as Deputy Assistant Commissioner for Collections, during which time tax warrant, parking violation, and environmental control board judgments were consolidated in the Collections Division. Before rejoining the Department of Finance in 2014, Jeffrey spent 12 years with the New York City Department of Education in several positions in the Finance and Administration Division overseeing the infrastructure that supports the City’s 1,200 school buildings, including a $500 million effort to build science labs in high schools. His last position was Chief IT and Operating Officer. Jeffery also has worked with the New York City Office of Management and Budget as Assistant Director of the Education Task Force overseeing the Department of Education and City University of New York operating budget and the $11 billion five-year capital budget for new pre-K-12 school construction, renovation and IT upgrades. Jeffrey has authored articles that have appeared in the Government Finance Review. He holds a B.A. in Government from Wesleyan University and a Master in Public Policy from Harvard University's John F. Kennedy School of Government. Kate Trachtenberg, Esq. Kate Trachtenberg came to the New York City Department of Finance as a Tax Litigator in 1992 after five years in private practice focusing on commercial litigation. She became Deputy Director of the Tax Advocacy and Resolution Unit in Legal Affairs in 1997, and continues to supervise the team of tax attorneys that represents the Department of Finance in business tax controversies at the Conciliation Bureau. Kate also serves as counsel to the Audit Division, with particular emphasis on Hotel Room Occupancy Tax, Real Property Transfer Tax and the Voluntary Disclosure and Compliance Program, and has designed and taught various courses as part of the Department of Finance’s Continuing Legal Education program. A graduate of Georgetown University Law Center, where she was a member of the founding editorial board of the Georgetown Journal of Legal Ethics, Kate also served as Law Clerk to the Chief Administrative Law Judge at the New York City Department of Housing and Urban Development. Kenneth T. Zemsky, Esq. A Managing Director with Andersen Tax, Kenneth Zemsky specializes in multistate corporate and personal income taxes with a concentration in New York State and New York City tax law. He has more than 33 years of experience and primarily works with multistate corporate taxpayers, high-net-worth individuals, alternative investment funds and owner-operated businesses. Ken has served on several boards, including the New York State and New York City Commissioner Tax Advisory Boards, New York State and New York City Tax Appeals Tribunal Advisory Boards, Interstate Tax Press Board of Advisors, and in the position of Chairman of the State and Local Tax Committee of the New York State Society of CPAs. A prolific author of articles appearing in a number of industry publications such as the Journal of Multistate Taxation and State Tax Notes, he is also a frequent speaker at tax symposia for various organizations, including the New York University State and Local Tax Institute; Georgetown State and Local Tax Institute; New York State Bar Association Tax Section; and New York State Society

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of CPAs State Tax Updates. Before joining Andersen Tax, Ken was a Tax Partner at Arthur Andersen and EY. He received both his BSFS and J.D. at Georgetown University. Leslie Zimmerman As the Assistant Commissioner of Payment Operations at the New York City Department of Finance, Leslie Zimmerman is responsible for communications, billing, payment processing and account management for parking, real estate and business tax payments and filings. She manages a staff of 218 that processes between 13 and 15 million transactions in a fiscal year totaling anywhere from $26 to $29 billion. A graduate of New York City public schools and Queens College, Leslie has worked in New York City government for more than 38 years, starting as a part-time file clerk during high school. She has overseen and directed a wide array of Department of Finance operations over the years that have contributed to significant changes and developments within the agency, including parking programs and exemption application processing. More recently she has spearheaded changes that leverage technological advances in electronic payment collection specifically mortgage servicing company collections and the IRS modernized e-file program, which allows vendors to electronically file New York City business tax returns along with their electronic federal filings through the IRS. In 1999, as the Assistant Commissioner of Revenue Operations, Leslie was awarded the Lawrence Brochhausen Memorial Award, named after the late Deputy Commissioner for Operations for the Department of Finance, who initiated important reforms in New York City. The award is given annually to a manager who demonstrates the ability to motivate and inspire others, foster cooperation, innovate, facilitate change, and achieve results.

The Right to be Informed You have the right to know how to comply with New York City tax laws. You have the right to clear and simple ex-planations of the laws and procedures in all of the Depart-ment of Finance tax forms, instructions, publications, no-tices and correspondence. You have the right to a clear explanation of and the reasons for a Department of Fi-nance decision. You have a right to a copy of this NYC Taxpayer Bill of Rights.

The Right to Quality Service You have the right to receive courteous and professional help in a reasonable amount of time from the Department of Finance. You have the right to be spoken to in a way you can easily understand. You have the right to receive clear and understandable communications from the De-partment of Finance. You have the right to write to and/or speak to a supervisor about poor service.

Right to Understand How Your Property Tax is Determined You have the right to understand in non-technical lan-guage how the Department of Finance calculated your property tax. You have the right to understand how the Department of Finance determines market value and as-sessed value. You have the right to understand the tax rates and tax caps that the Department of Finance applied in calculating your property tax. You have the right to know what property tax exemptions and/or abatements you can apply for and how to apply for them. You have the right to receive an explanation, in writing, why the Depart-ment of Finance accepted, denied or removed a property tax exemption or abatement.

The Right to a Fair and Just Tax System You have the right to expect the Department of Finance to consider facts and circumstances that might affect your taxes. You have the right to be given time to provide in-formation to support your claim. You have the right to expect that the Department of Finance will fully use any tax laws that allow the Department of Finance to consider your ability to pay should you ask for such help. You have the right to receive assistance from the Taxpayer Advo-cate if the Department of Finance has not, through its nor-mal processes, fixed your tax issue properly within a rea-sonable amount of time or if you believe that the Depart-

ment of Finance is violating one of these rights.

The Right to Retain Representation You have the right to have someone help you in your dealings with the Department of Finance. If your repre-sentative has filed a Power of Attorney, then the Depart-ment of Finance must recognize that person as your rep-resentative and can share your tax information with that person

The Right to Pay No More than the Correct Amount of Tax You have the right to pay only the amount of tax legally due, including interest and penalties. You have the right to expect the Department of Finance to apply tax pay-ments correctly. You have a right to receive a bill or state-ment showing the amount of tax, including interest and penalties, that is due.

The Right to Finality You have the right to know the deadline for challeng-ing the Department of Finance’s position. You have the right to know the maximum amount of time the Department of Finance has to audit a specific tax year or collect a tax debt. You have the right to know the maximum amount of time you have to request a refund of taxes. You have the right to know when the Department of Finance has finished an audit. You have the right to know when and how the Department of Finance can collect a tax that is due. You have the right to know that the Department of Finance’s action is final.

The Right to Privacy You have the right to expect that any inquiry, exami-nation, or enforcement action by the Department of Finance will follow the law. You have the right to ex-pect that any such action by the Department of Fi-nance be no more intrusive than necessary. You also have the right to expect that the Department of Fi-nance will respect all due process rights, including search and seizure protections.

The Right to Confidentiality You have the right to expect that any information you provide to the Department of Finance will not be shared with a person or organization outside of the Department of Finance, unless approved by you or by law. You have the right to be notified if your infor-mation is shared without your approval or sharing was not allowed by law. You have the right to expect the Department of Finance to take action against employees and others who wrongfully use or share your information.

The Right to Challenge the Department of Finance’s Position and Be Heard You have the right to challenge and provide more documentation to the Department of Finance. You have the right to expect that the Department of Fi-nance will quickly and fairly review your challenge and documents. You have the right to receive, in writing, an explanation of why the Department of Fi-nance does not agree with your position. You have a right to receive a written explanation of why the De-partment of Finance does not accept your docu-ments. You have the right to be told about how to appeal a Department of Finance decision or how to request a Conciliation Conference. You have a right to receive a written response to your appeal or your Conciliation Conference. You have the right to be told when and how you can file a case with the Tax Commission, the Tax Appeals Tribunal and the New York Supreme Court.

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NYC Taxpayer Bill of Rights

CONTACT US

THE OFFICE OF THE TAXPAYER ADVOCATE 253 BROADWAY 6TH FLOOR

NEW YORK, NY 10007

nyc.gov/taxpayeradvocate

Taxpayer Bill of Rights (English) Rev. 10/23/2015

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New York State Tax Reporter, Policy Bulletin 2-84, NewYork, ¶20001201143, New York City Department of Finance, (Apr. 2, 1984)

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¶20001201143. ¶20001201143. Policy Bulletin 2-84, New York City Department of Finance, NY-TAXRPTR20001201143, April 02, 1984.

Finance

GENERAL CORPORATION TAX

POLICY BULLETIN 2-84

The City of New York

Department of Finance

Municipal Building

New York, N.Y. 10007

Telephone 566-2574

Philip R. Michael

Commissioner of Finance

RE: Interest Attributable to Subsidiary Capital

I Introduction

Section R46-2.0.8(a)(1) of the New York City Administrative Code provides that entire net income shall bedetermined by excluding: “income, gains and losses from subsidiary capital which do not include the amount of arecovery in respect of any war loss;”

Section R46-2.0.8(b)(6) of the New York City Administrative Code provides that entire net income shall bedetermined without the subtraction of:

“in the discretion of the [commissioner] of finance, any amount of interest directly or indirectly and any otheramount directly attributable as a carrying charge or otherwise to subsidiary capital or to income, gains or lossesfrom subsidiary capital;”

This Bulletin presents general guidelines to be followed in determining whether an amount of interest expensewill be directly or indirectly attributable to subsidiary capital and what portion will therefore be disallowed indetermining entire net income. It should be noted that these are only general guidelines and not inflexibly fixedrules. The ultimate decision in each case will depend upon the facts and circumstances involved in the individualsituation.

II Direct Attribution Rules

In determining if interest expense is directly attributable to business capital, investment capital or subsidiarycapital, the purpose for which the indebtedness is incurred or continued will be the deciding factor. Taxpayersclaiming a direct attribution of interest expense to business capital, investment capital or subsidiary capitalmust submit a listing of each asset to which interest expense is directly attributed, including the amount of suchinterest expense, and the nature, the date and the amount of the liability incurred to acquire the asset.

In cases where it is determined that the indebtedness is incurred or continued to purchase or maintain subsidiaryassets, the interest expense is not deductible. In cases where it is established that the indebtedness isincurred or continued to purchase or maintain business assets or for business purposes (and unrelated to anyinvestments, loans or advances to subsidiary corporations), the interest is deductible. The amount of interestexpense directly attributable is excluded from total interest expense; the remainder of which will be apportionedby the formula described in section III below.

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The totality of the facts and circumstances will be examined in each case to determine the purpose for theindebtedness.

Examples of Nondeductible Interest Directly Attributable to Subsidiary Assets:

(1) The interest on indebtedness, the proceeds of which are used to buy a subsidiary, is not deductible fromentire net income.

(2) Interest is not deductible on indebtedness incurred to finance a separate account maintained for the solepurpose of buying and selling the stock of subsidiaries.

(3) Interest is not deductible on funds borrowed by a taxpayer for relending, in whole or part, to its subsidiaries.Where only part of the borrowed funds are reloaned to subsidiaries, that part which is attributable to the moneylent to subsidiaries is not deductible. Whether the remaining interest is deductible depends on the purpose of theindebtedness.

Examples of Deductible Interest Directly Attributable to Non-Subsidiary Assets

(1) A deduction is allowed for interest on indebtedness which is incurred or continued to acquire or improvephysical business facilities (e.g., a bond and mortgage).

(2) Interest is deductible on indebtedness which is incurred to finance a nonrecurring major business expense.

III. Indirect Attribution Rules

A. If it is not possible to isolate the assets to which interest expense is directly attributed, it will be presumed thateach asset held by a corporation shares a portion of the cost of its borrowings, other liabilities and net worth.Therefore, a proportional part of a corporation's interest expense on borrowings is attributable to subsidiarycapital and is properly disallowed in determining entire net income.

The relationship of the corporation's investment in subsidiary capital to its total assets determines the portion ofinterest expense indirectly related to subsidiary capital and income. The formula to determine interest expenseindirectly attributable to subsidiary capital is:

City of New York, Department of Finance POLICY BULLETIN 2-84B Total Interest Expense × Investment in Subsidiaries

--------------------------

Total Assets

B. Definitions

1. Total Interest Expense is the total interest deducted by the taxpayer in arriving at Federal taxable income less:

a. 100 percent of interest expense required to be included in the computation of entire net income in accordancewith Section R46-2.0.8(b)(5) of the Administrative Code (interest paid to stockholders);

b. Interest expense on federal, state, or local tax deficiencies;

c. Interest expense directly traceable to subsidiary capital;

d. Interest expense directly traceable to business and/or investment capital.

2. Investment in Subsidiaries is the average cost of investments in the stock of the subsidiary, includingcontributions to capital, plus the average of any loans and advances (exclusive of accounts receivable acquiredin the ordinary course of business), as defined in Section R46-2.0.3 of the Administrative Code, before thededuction of current liabilities attributable to subsidiary capital.

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3

If total interest expense is reduced by “(1)(c)”, the subsidiary capital in the apportionment formula is reduced byan amount equal to the average liability to which interest expense is directly traced.

In determining the amount of loans and advances, loans and advances to the parent by one of its subsidiariesmay be offset against loans and advances to such subsidiary. At no time may loans and advances from asubsidiary reduce loans and advances from the parent to an amount lower than zero (0). Loans and advances tothe parent may not be offset against capital stock or against loans and advances to any other subsidiary.

3. Total Assets are generally the average net book value of all assets, after depreciation, amortization and othercharges to capital.

If total interest expense is reduced by “(1) (a), (c) or (d)”, total assets in the apportionment formula are reducedby an amount equal to the average liability to which interest expense is directly traced.

4. Assets, either subsidiary or non-subsidiary, acquired through the original issue of capital stock should not beincluded in the formula. However, assets acquired through the issuance of treasury stock are included in theformula.

IV Effective Date. This policy bulletin will be effective for all taxable years or periods open for audit.

/s/

PHILIP R. MICHAEL

Commissioner of Finance

Promulgated: April 2, 1984

DEPARTMENT OF FINANCEAUDIT DIVISION

F I N A N C E NEW YORK THE CITY OF NEW YORK DEPARTMENT OF FINANCE

PP-2008-12 03/31/08

STATEMENT OF AUDIT PROCEDURE

GCT & UBT Treatment of Repurchase

Agreements and Securities Lending and Borrowing Transactions for Financial Services

Firms Regularly Engaged in Such Activities. I. Statement of the Issues – Statutory and Regulatory Background

The law governing the New York City General Corporation Tax (“GCT”) and the Unincorporated Business Tax (“UBT”) defines investment capital as “investments in stocks, bonds and other securities, corporate and governmental, not held for sale to customers in the regular course of business…” Administrative Code of the City of New York §11-602.4 and §11-501(h). Rules adopted in 1990 for purposes of the GCT elaborated on that definition, addressing among other items the treatment of repurchase agreements. Title 19 Rules of the City of New York (“RCNY”) §11-37. The 1990 rules are silent regarding the treatment of securities lending and borrowing transactions. Although the 1990 rules apply to the GCT, the Department generally applies those rules in comparable situations for purposes of the UBT. Taxpayers are permitted to elect to treat “cash on hand or on deposit” as business or investment capital. Ad. Code §11-602.6 and §11-501(j). The 1990 rules treat qualifying corporate debt instruments that would otherwise qualify as investment capital as “cash on hand or on deposit,” subject to the cash election, if the remaining term of the instrument is six months or less or the instrument is payable on demand. 19 RCNY §11-37(a)(3). The expanded definition of cash does not expand the overall amount of investment capital a taxpayer has. However, it removes the short-term debt from the calculation of the investment allocation percentage while permitting taxpayers to allocate the income from cash (and the total investment capital that includes the cash) by the investment allocation percentage. Section 11-602.5 of the Administrative Code defines investment income as income from investment capital less “in the discretion of the commissioner of finance, any deductions allowable in computing entire net income which are directly or indirectly attributable to investment capital or investment income” and

less a portion of the taxpayer’s net operating loss. Administrative Code section 11-501(1) contains a comparable definition for purposes of the UBT. The city rule, Title 19 RCNY section 11-69(b) definition of “Investment Income” (i)(A), reflects the exercise of that discretion by providing that “investment income must be reduced by any deductions, allowable in computing entire net income, which are directly or indirectly attributable to investment capital or investment income.” This Statement of Audit Procedure provides guidance to auditors regarding the correct tax treatment of certain repurchase and reverse repurchase agreements and securities lending and borrowing transactions by financial services firms regularly engaged in such activities for purposes of the GCT and the UBT. This SAP is not intended to address the audit treatment of other taxpayers engaged in similar activities. The audit treatment of those taxpayers will depend upon the facts and circumstances of the taxpayers’ activities.

II. General Rules

A. As more fully described below, for financial services firms regularly engaged in both repurchase and reverse repurchase agreements, the auditor will treat reverse repurchase agreements that constitute qualified corporate debt instruments with durations of not more than six months as cash, and therefore subject to the cash election. In addition, for such taxpayers interest expenses arising out of repurchase agreements will be subject to a rebuttable presumption that such interest is directly attributable to reverse repurchase agreements. Therefore, if cash is treated as business capital; per the election, these expenses will be directly attributable to business capital; if cash is treated as investment capital, these expenses will be directly attributed to investment capital.

B. Where a financial services firm regularly engages in securities lending and

borrowing transactions, the auditor will treat the income and expenses from those transactions as business income and expenses.

III. Audit Procedures A. Repurchase Agreements

A Repurchase Agreement is a transaction in which one party sells securities, most often government securities, to a second party and simultaneously contracts to repurchase the same or equivalent securities from the second party. Existing regulations generally treat repurchase agreements as collateralized loans.1 These transactions are usually of short duration, either overnight or for a few days, and almost never have a term exceeding six months. When the transaction is treated as a loan, the seller of the securities is in the position of the borrower while the purchaser of the securities, the holder of the reverse repurchase agreement, is in the position of the lender.

1 Situations in which the transaction qualifies to be treated as an actual sale of the securities to the lender under 19 RCNY§11-37(f) are beyond the scope of this Statement of Audit Procedure.

Repurchase and reverse repurchase agreements represent a significant activity of the financial services sector. Taxpayers frequently report short-term reverse repurchase agreements as items of cash if they are otherwise qualifying corporate debt instruments2, and such agreements are usually treated as investment capital under the cash election.

1. In the audit of a financial services firm regularly engaged in repurchase and reverse repurchase transactions, the auditor will accept a taxpayer’s treatment of reverse repurchase agreements as cash subject to the cash election if the agreements otherwise qualify as qualifying corporate debt instruments.

2. On audit, the auditor will treat all interest expense incurred by the

taxpayer from repurchase agreements with respect to government securities as directly attributable to reverse repurchase agreements with respect to government securities except to the extent that the taxpayer can demonstrate to the satisfaction of the auditor both (i) that the taxpayer’s activities with respect to repurchase agreements are segregated on the taxpayer’s books and records and on an operational basis from its activities with respect to reverse repurchase agreements and (ii) that the taxpayer’s entry into repurchase agreements is not related to any material degree, including as hedges, to its entry into reverse repurchase agreements, in which case, the auditor may take into account the particular facts and circumstances of the taxpayer in attributing the interest expense from repurchase agreements.

3. Compliance with this portion of the Statement of Audit Procedure does

not preclude inquiry, on audit, as to whether the cash election and investment capital treatment are appropriate in a given situation.

B. Securities Lending and Borrowing Transactions

Financial services firms engage in securities lending and borrowing transactions for a variety of reasons, including: covering their own or customers’ short sales; covering failed sales by customers; obtaining securities to lend to a third party; and as a source of funds. Broker dealers lend securities from their own inventory or trading accounts. They also can use securities and cash held in customers’ margin accounts in these transactions. In general, for financial statement purposes broker dealers account for securities lending and borrowing activity the same way regardless of the source of the securities loaned or the use to which borrowed securities will be put. Broker dealers engage in a significant volume of both securities lending and securities borrowing activity.

2 Reverse repurchase agreements that are not qualifying corporate debt instruments cannot be treated as cash subject to the election. Title 19 RCNY §11-37(a)(3)

A stock loan consists of several elements:

The lender of the stock transfers to the borrower title to the stock in exchange for the stock borrower’s collateral, which can be cash, a letter o credit, or government securities, generally adjusted on a frequent basis to equal the value of the stock borrowed plus a cushion.

Where non-cash collateral is provided, the stock borrower is entitled to

any income that may accrue on the collateral during the term of the transaction.

Where the collateral is cash, the stock borrower receives an agreed-upon

return on the collateral (commonly referred to as the “rebate fee”). The stock lender can retain any earnings from the use of the cash collateral.

The stock borrower agrees to pay the stock lender an amount equal to any

dividends declared on the stock during the term of the loan.

The stock borrower must also pay the stock lender a fee (commonly referred to as the “borrow fee”).

The net of the rebate fee and the borrow fee is ordinarily exchanged

between the stock borrower and stock lender. The rebate fee will exceed the borrow fee, and the stock lender will pay the stock borrower the net amount . This net amount is typically reported as interest income to the stock borrower and interest expense to the stock lender.

When auditing a financial services firm that is a GCT or UBT taxpayer regularly engaged in stock lending and stock borrowing:

1. The auditor will require that the net of the rebate fee and the borrow fee be treated as business income to the stock borrower, and business expense to the stock lender. Where the parties do not net those fees, the gross amount of the fees will be treated as business income and expenses to the respective parties. The payment made to the stock lender in lieu of the dividends declared similarly will be treated as a business expense of the stock borrower and business income to the stock lender.

2. Where the stock borrower provides cash as collateral for the transaction, the

auditor will require the stock borrower to treat that cash as business capital and not as cash on hand or on deposit for purposes of the cash election.

3. For purposes of the receipts factor in the stock borrower’s or stock lender’s

business allocation percentage, the auditor will require the various fees describe in item (1) above to be treated as having a source at the location of the payor. The auditor will require the taxpayer to net the amounts of payments of fees against the fee receipts for purposes of determining the receipts factor unless the auditor determines that the facts and circumstances indicate that such netting will result in an improper reflection of the taxpayer’s stock lending and borrowing activity in New York City.

4. The income received by the stock lender from the use of cash collateral is dependent on a separate transaction to which the stock borrower is not a party. Therefore, the stock lender’s tax treatment of this income depends on the nature of the use of the cash collateral and is not governed by this Statement of Audit Procedure.

5. Other securities lending and borrowing transactions structured under

arrangements that are similar to stock lending and borrowing transactions will be treated in a manner consistent with the foregoing procedures.

IV. Effective Date This Statement of Audit Procedure reflects existing Department interpretations of applicable laws and rules. Therefore, this Statement of Audit Procedure applies to all open tax periods.

DEPARTMENT OF FINANCEAUDIT DIVISION

F I N A N C E NEW YORK THE CITY OF NEW YORK DEPARTMENT OF FINANCE

GCT-2008-04 4/09/08

STATEMENT OF AUDIT PROCEDURE

NON-INTEREST EXPENSE ATTRIBUTION

I. BACKGROUND For taxable years beginning after December 31, 1987, the Commissioner of Finance has exercised the Commissioner’s discretion to require certain amounts deducted for federal income tax or New York City General Corporation Tax (“GCT”) purposes that are directly or indirectly attributable to subsidiary capital or to income, gains or losses from subsidiary capital as a carrying charge or otherwise, to be added back to federal taxable income for purposes of computing entire net income. In addition, the Commissioner has exercised the Commissioner’s discretion to require investment income to be reduced by deductions directly or indirectly attributable to investment capital or to income, gains or losses from investment capital. Finally, for taxable years beginning after June 30, 1994, the Commissioner has exercised the Commissioner’s discretion to require investment income of a taxpayer subject to the Unincorporated Business Tax (“UBT”) to be reduced by deductions directly or indirectly attributable to investment income or capital. Consistent with New York City’s longstanding tradition as a center of corporate headquarters, under the GCT and UBT, investment income generally is allocated to the City at a lower percentage than business income, and, for GCT purposes, income, gains and losses from subsidiary capital are excluded from entire net income. There is, however, a tax on subsidiary capital, but it is imposed at a very low rate. The purpose of expense attribution is to avoid a double tax benefit resulting from giving favorable tax treatment to income from investment and subsidiary capital while simultaneously allowing a deduction against business income for expenses related to investment or subsidiary capital. In accordance with New York City’s corporate headquarters tradition, the expense attribution rules are to be construed so as not to alter a system designed and intended to enable New York to attract and retain corporate activity by attracting capital and offering a unique and certain set of structures for the favorable treatment of many activities, such as the holding of subsidiaries and investments. II. SCOPE

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GCT and UBT returns affected by the attribution requirements described above are subject to both desk and field audits. This Statement of Audit Procedure (“SAP”) is intended to give desk and field auditors guidance on how to review a return to determine whether an appropriate attribution of non-interest expenses has been made by a taxpayer. This SAP provides guidance on the direct and indirect attribution of non-interest deductions among the various classes of capital and income. This SAP is effective for tax years beginning on or after January 1, 1995, and supersedes SAP 93-1-GCT (3/1/93) for those years. This SAP does not address the issue of attribution of interest expenses or the issue of attribution of liabilities in computing the tax on business and investment capital and the separate tax on subsidiary capital. Policy Bulletin 2-84 issued on April 2,1984 will continue to be in effect with regard to the attribution of interest expenses. III. AUDIT PROCEDURES A. Desk Audit

As part of the review of GCT and UBT returns, desk auditors should determine whether an attribution of expenses to the appropriate classes of capital or income has been made. If the GCT return reports investment or subsidiary capital or income, or a UBT return reports investment income and, in either case, it appears that the taxpayer’s direct and indirect attribution of non-interest expenses to the respective forms of capital is reasonable, no further examination should be made of the attribution of non-interest expenses as part of a desk audit. If the desk auditor is in doubt as to whether the taxpayer has made a reasonable attribution of non-interest expenses, the desk auditor should consult with the Desk Auditor Unit Manager. If the taxpayer reports investment or subsidiary capital or income on the return but has attributed none of its non-interest expenses to those classes of capital or income, or the Desk Audit Manager determines that the taxpayer’s direct or indirect attribution of non-interest expenses to investment or subsidiary capital or income is unreasonable, the following steps will be taken. (1) The desk auditor will inform the taxpayer by letter that the issue of attribution of expenses is being examined. That letter will give the taxpayer a reasonable time to either submit corrected schedules to make an appropriate attribution or to provide a detailed explanation as to why the position taken on its original return with regard to attribution was appropriate. The auditor will provide a reasonable additional amount of time to comply if requested by the taxpayer or its authorized representative. (2) If the taxpayer neither submits corrected schedules nor provides a reasonable explanation for the position taken on its original return within the time allowed and the taxpayer has not attributed any non-interest expenses to investment or subsidiary income or capital, the auditor may attribute all the non-interest expenses shown on the return, other than those expenses listed at IV.A(3) (b) (i) (A) below that are readily identifiable from the return or from

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information provided by the taxpayer, to the various types of capital or income using the appropriate method of indirect attribution described below.1

(3) If, on the basis of the information provided on the return or in response to inquiries directed to the taxpayer described above, the Desk Audit Unit Manager determines that the taxpayer has not made a reasonable attribution of non-interest expenses to investment or subsidiary capital or income, the desk auditor may apply the appropriate method of indirect attribution to attribute to subsidiary, investment or business income or capital any non-interest expenses that, in his or her discretion, exercised in accordance with the standards set forth below, cannot readily be directly attributed based on the information provided.

B. Field Audit

Once a return has been selected for field audit, the taxpayer’s attribution of non-interest expenses can be examined as part of the audit. The field audit unit may examine this issue even if it has been examined as part of a desk audit. If the attribution of non-interest expenses is to be examined, an information document request will be sent to the taxpayer concerning this issue, giving the taxpayer a reasonable period of time to provide documentary support for the propriety of the direct and indirect attribution of non-interest expenses in its original return, or to submit corrected schedules making an appropriate attribution.

If the taxpayer provides acceptable documentation supporting the propriety of the direct and indirect attribution shown on the return or submits corrected schedules with acceptable supporting documentation, the auditor, subject to further review, will close his or her examination of this issue based upon the information or schedules submitted.

If the taxpayer makes a reasonable effort to respond to the auditor’s request but the auditor determines that one or more particular non-interest expenses have not been properly attributed, the field auditor should make a reasonable effort to directly attribute the expenses if they are easily identifiable and the attribution is supported by acceptable documentation in accordance with the standards set forth below. If a non-interest expense cannot easily be directly attributed, the expense may be attributed by the appropriate method of indirect attribution as described below. If the taxpayer does not make a reasonable effort to support its original return or submit corrected schedules, the auditor may apply the appropriate method of indirect attribution to attribute to subsidiary, investment or business income or capital any expenses that, in his or her discretion, exercised in accordance with the standards set forth below, cannot readily be directly attributed based on the information provided.

1 The appropriate method will be the combined asset and income method unless the taxpayer has properly elected the alternative asset method as described below at IV.A(3) (c).

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C. Prior State Audit

This SAP is the product of a coordinated effort by the New York City Department of Finance and the New York State Department of Taxation and Finance. Pursuant to that effort, the Department of Finance has agreed that if the taxpayer has previously been the subject of a field audit by the New York State Department of Taxation and Finance on the issue of non-interest expense attribution for a tax period with respect to which a City audit is being conducted and the State audit has been concluded by the issuance of a no-change letter, a notice and demand or a notice of deficiency prior to the commencement of the City audit, City desk and field auditors will not propose non-interest expense attribution adjustments that are inconsistent with the audit findings of the Department of Taxation and Finance except to the extent necessitated by differences between applicable State and City law unless the taxpayer waives such conformity during the course of the City audit. Any such waiver shall be irrevocable for the tax period under audit. It should be noted in this regard that such State and City conformity rules will apply only if the taxpayer makes the same elections for both State and City purposes under section IV(3) (b) (i) (A) (relating to direct attribution to business capital), section IV (3) (b) subparagraphs (v) and (vi) (relating to the 95 percent safe harbors), and section IV (3) (c) (iii) (relating to the use of the asset percentage in indirect attribution). In the case of simultaneous audits, the State and City have agreed to consult with each other on this issue. Auditors should ask taxpayers if they are being audited by the State on this issue.

IV. ATTRIBUTION STANDARDS

Desk and field auditors are required to apply the standards set forth below in determining whether a taxpayer has properly attributed non-interest expenses under the above procedures.

A. Deductions must be properly deducted by taxpayer.

(1) The deductions subject to attribution are limited to those deductions properly allowed to the taxpayer for GCT or UBT purposes adjusted as provided in (a).

(a) Expenses subject to discretionary adjustment. Administrative Code section 11-605(5) and 11-602.8(d) authorized the Commissioner of Finance to make certain adjustments to items of income, deduction or capital where necessary to properly and accurately reflect income of a taxpayer in the City. Similarly, the Commissioner of Finance may determine that the taxpayer has improperly reported its federal taxable income and that gross income, deductions, credits or allowances should be redistributed, apportioned or allocated between the taxpayer and another entity owned or controlled directly or indirectly by the same interests under Internal Revenue Code section 482. In any case where the Commissioner of Finance has exercised his or her discretion described above by adjusting a deduction for all or part of any expense, that deduction is subject to attribution after any such adjustment.

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However, an expense may not be a discretionary adjustment, as described above, to all or any part of an expense.

(b) Reimbursed non-interest expenses. (i) Where a taxpayer is reimbursed in whole or in part for non-interest expenses incurred on behalf of another person or entity, the amount of reimbursement must be treated as business income, and deductions for expenses for which, and to the extent, such reimbursement is received must be directly attributed to business income and capital.

(ii) Non-interest expenses will be treated as reimbursed provided that on or before the due date, excluding extensions, for its return for the taxable year, reimbursement is made pursuant to a written agreement between the parties, or the taxpayer receives payment of an amount equal to the amount of the expense incurred either as a direct cash payment or through offsets to other accounts receivable or payable and the payment or adjustment is identified as a reimbursement on the books and records of the taxpayer and the payor. Absent a written agreement or timely reimbursement, the nature of the transaction as one involving reimbursed expenses must be proven by the taxpayer. Amounts incurred by a taxpayer for expenses charged back to another person or entity for which no reimbursement is received cannot be considered reimbursed for these purposes.

(c) Non-interest expenses charged to another person or entity. Non-interest expenses incurred by a taxpayer for the benefit of, or on behalf of, an affiliated corporation or other affiliated entity that are either charged back to that corporation or other entity or offset on the books and records of the taxpayer, other than through a reimbursement arrangement described above or through a management fee described below, are not subject to attribution provided a deduction for such expenses is not claimed by the taxpayer. (d) Management fees. Compensation received through a management or similar fee arrangement between the taxpayer and a corporation or other entity, whether or not affiliated with the taxpayer, must be treated as business income, and deductions for non-interest expenses compensated for by such management or similar fee must be directly attributed to business income and capital. Non-interest expenses can be treated as compensated for through a management or similar fee provided the fee is paid pursuant to a written agreement. Absent a written agreement, the nature of the transaction as one involving compensation through a management or similar fee must be proven by the taxpayer, for example, by submission of contemporaneous corporate minutes or memoranda.

(2) Federal base modifications. In determining those deductions subject

to attribution, adjustments required by the Administrative Code must be taken into account. In addition, expenses required to be capitalized and for which no

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deduction is allowed for City purposes are not subject to attribution under these provisions.

(3) Attribution of non-interest deductions.

(a) The following rules must be applied in determining whether a taxpayer has properly attributed non-interest deductions directly and indirectly among classes of capital and the income, gains and losses therefrom. Deductions not directly attributed to one or more classes of capital or income under these rules must be included in the residual group of deductions that will be indirectly attributed as provided in paragraph (c). (b) Direct attribution of non-interest deductions. Where possible, the taxpayer must directly attribute to the appropriate class of capital or income those non-interest deductions for expenses that proximately, and not incidentally, benefit that class of capital or income. The determination of which classes of capital or income are proximately benefited must be made on the basis of all of the facts and circumstances, including but not limited to the nature of the income that proximately relates to the expenses that are the basis for the deduction. Taxpayers should maintain books and records sufficient to support the direct attribution of expenses among the classes of capital and income. Except as provided in subparagraph (i) (A), below, if a deduction is for an expense that proximately benefits more than one class of capital or the income therefrom, the deduction must be apportioned among those classes of capital or income that are benefited. (i) Direct attribution of non-interest deductions to business capital or income.

(A) At the election of the taxpayer, each of the following non-interest deductions will be irrebuttably presumed to be directly attributable to business income or capital.2 In response to any letter sent to the taxpayer as provided under the procedures set forth above, the taxpayer need only substantiate the nature and amount of each item on this list with respect to which such an election is made; the taxpayer is not required to separately establish the basis for direct attribution of those items for which such an election is made to business income or capital:

(a) cost of goods sold;

(b) bad debts other than items properly classified as

subsidiary or investment capital;

(c) property, excise and sales and use taxes;

2 This does not preclude as a separate issue a discretionary adjustment as described in section IV.A (1) (a)

above, to any expense on this list. Such adjustments could relate, for example, to the amount of the expense or the identity of the taxpayer to which the deduction is allowable.

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(d) real estate rents, depreciation and repairs;

(e) utilities including telecommunications costs;

(f) amortization of real property leasehold costs and improvements;

(g) depletion;

(h) advertising;

(i) non-interest expenses for which reimbursement is received in the form of a management fee treated on the report as business income’

(j) research and development;

(k) marketing expenses;

(l) property and casualty and product liability insurance and uninsured deductible casualty and product liability losses;

(m) compensation packages of the chief executive officer,

chief financial officer and chief operating officer (identified by reference to duties and not to titles);

(n) directors’ fees, expenses and indemnity insurance;

(o) charitable contributions;

(p) stationery, printing, postage and other similar distribution costs;

(q) non-interest costs and expenses relating to

communication and interaction with the taxpayer’s shareholders and investors;

(r) non-interest costs and expenses relating to routine

reporting requirements of the Securities and Exchange Commission or other federal, state or local regulatory entities, routine financial statements and tax filings;

(s) travel and entertainment expenses;

(t) non-interest costs and expenses incurred in connection with an uncompleted acquisition;

(u) non-interest costs and expenses of developing

company or group-wide administrative procedures; and

(v) internal auditing costs and expenses.

(B) Taxpayers shall directly attribute to business capital or income those non-interest deductions for expenses that proximately

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and not incidentally benefit business capital or income. The following is a non-exclusive list of examples of non-interest deductions that, except as provided in subparagraph (i) (A) above, under appropriate facts and circumstances may be directly attributed to business capital or income. In response to any letter sent to the taxpayer as provided under the procedures set forth above, the taxpayer must substantiate the direct attribution of these deductions to business capital or income as well as the amount of the deduction:

(a) deductible costs of shipping goods to customers;

(b) compensation and other benefits of officers and employees engaged in manufacturing, sales, services, or other activities directly producing business capital or income (for situations where such activities are not exclusive, see examples in section IV.B below); and

(c) deductible legal expenses incurred in conducting the

taxpayer’s business, such as costs incurred to acquire or protect a copyright or patent owned by the taxpayer and used in the taxpayer’s business or legal expenses incurred in negotiating contracts or resolving labor disputes with employees engaged directly in manufacturing, sales, services, or other activities directly producing business capital or income.

(d) Reimbursed non-interest expenses as provided in

section IV.A (1) (b) above.

(ii) Direct attribution of non-interest deductions to subsidiary capital or income, gains or losses therefrom. Taxpayers shall directly attribute to subsidiary capital or income those non-interest deductions for expenses that proximately and not incidentally benefit subsidiary capital or income. The following is a non-exclusive list of examples of non-interest deductions that, except as provided in subparagraph (i) (A), above, should be directly attributed to subsidiary capital or income from subsidiary capital:

(A) compensation and other benefits of officers and employees engaged in the acquisition, management or disposition of subsidiary capital or income therefrom (for situations where such activities are not exclusive, see examples in section IV.B below); (B) legal and accounting expense deductions relating to the management of subsidiary capital or income therefrom; (C) computer expense deductions relating to the management of subsidiary capital or income therefrom:

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(D) other deductible fees and expenses incurred in connection with the completed purchase of subsidiary capital, or the sale, whether or not completed, of subsidiary capital; (E) other deductible expenses incurred by the taxpayer for its own benefit in its role as a holder of subsidiary capital, including but not limited to;

(a) deductible expenses incurred in reviewing information prepared by the subsidiary where such review is undertaken by the taxpayer in its role as a holder of subsidiary capital; (b) deductible expenses incurred in connection with the general supervision of a subsidiary by the taxpayer’s employees (stewardship expenses). These expenses do not include expenses relating to the day-to-day operation of the subsidiary; (c) deductible expenses incurred by the taxpayer to preserve its investment in subsidiary capital; and (d) deductible expenses incurred in meeting reporting requirements or other legal obligations imposed on the taxpayer in its role as a holder of subsidiary capital.

(iii) Direct attribution of non-interest deductions to investment capital or income. Taxpayers shall directly attribute to investment capital or income those non-interest deductions for expenses that proximately and not incidentally benefit investment capital or income. The following is a non-exclusive list of examples of non-interest deductions that, except as provided in subparagraph (1) (A), above, should be directly attributed to investment capital or income.

(A) safe deposit box rentals for safekeeping of certificates or other documents relating to investment capital; (B) financial news subscriptions utilized exclusively by employees engaged primarily in the acquisition, management or disposition of investment capital or the income therefrom; (C) compensation and other benefits of officers and employees engaged in the acquisition, management or disposition of investment capital or the income therefrom (for situations where such activities are not exclusive, see examples in section IV.B below); (D) the deductible cost of insurance and fidelity bonds covering investment capital; (E) deductible custodian fees, investment advisory fees and legal and accounting costs and fees relating to the management of investment capital or the income therefrom;

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(F) deductible computer expenses relating to the, management of investment capital or the income therefrom; (G) deductible fees and expenses incurred in connection with the completed purchase of investment capital, or the sale, whether or not completed, of investment capital; and (H) other deductible expenses incurred by the taxpayer for its own benefit in its role as a holder of investment capital, including but not limited to;

(a) deductible expenses incurred in reviewing information prepared by the corporation, where such review is undertaken by the taxpayer in its role as a holder of investment capital; (b) deductible expenses incurred in connection with the general supervision of the corporation by the taxpayer’s employees. These expenses do not include expenses relating to the day-to-day operation of the corporation; (c) deductible expenses incurred by the taxpayer to preserve its investment capital; and (d) deductible expenses incurred in meeting reporting requirements or other legal obligations imposed on the taxpayer in its role as a holder of investment capital.

(iv) Direct attribution to more than one class of capital. A specific non-interest deduction may represent an expense that proximately and not incidentally benefits more than one class of capital or income. In that case, the taxpayer should directly attribute a portion of that deduction to each class of capital or income proximately benefited by that expense using a method that is reasonable for that particular expense. Such a method can be based on one or more factors appropriate given the nature of the deduction. Such factors may include but are not limited to time, space, payroll, and numbers of personnel. See examples below. Deductions listed in subparagraph (i) (A) of this paragraph are, where the taxpayer so elects, irrebuttably presumed to be directly attributable entirely to business capital. (v) Operating Division Safe Harbor. (A) If a taxpayer can substantiate that at least 95 percent of the non-interest expenses of an operating division are directly attributable to a particular class of capital or income, 100 percent of the non-interest expenses of that operating division may be directly attributed to that class of capital or income at the election of the taxpayer. Non-interest expenses subject to this rule include expenses listed in subparagraph (i) (A) of this paragraph and all other non-interest expenses of that operating division. A taxpayer electing to u se these rules for operating divisions may not also elect to use the entity-wide safe harbor provided in subparagraph (vi) below.

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(B) For purposes of this subparagraph, the term “operating division” shall mean a subunit of the taxpayer that meets the following criteria:

(a) the activities of the submit constitute a trade or business; and

(b) a separate set of books and records is maintained with

respect to the subunit.

(C.) Trade or Business. The determination as to whether activities constitutes a trade or business is dependent on all of the facts and circumstances. Generally a trade or business is a specific set of activities that constitutes or would constitute an economic enterprise carried on for profit if carried on by a separate entity. To constitute a trade or business, a group of activities must ordinarily include every operation that forms a part of, or a step in, an income producing or profit making process including the collection of income and the payment of expenses. It is not necessary that the activities carried out by an operating division constitute a different trade or business from those carried out by other divisions of the taxpayer. A vertical, functional or geographic division of the same trade or business may be a trade or business for this purpose provided that the activities otherwise qualify as a trade or business under this subparagraph (v) (C). However, activities that are merely ancillary to a trade or business do not constitute a trade or business. For example, administrative activities, including, but not limited to, legal, accounting or financial services, where such services are not offered to the public on a regular and continuous basis by the taxpayer, will generally be considered ancillary and will not constitute a trade or business for this purpose. (D) Separate Books and Records. To have a separate set of books and records a subunit must maintain at a minimum, a separate set of ledger accounts (i.e. cash receipt, cash disbursements, accounts receivable, and accounts payable ) and a general journal or similar book of original entry.

(vi) Entity-Wide Safe Harbor. If a taxpayer can substantiate that at least 95 percent of the non-interest expenses of the taxpayer are directly attributable to a particular class of capital or income, the taxpayer may elect to directly attribute 100 percent of the non-interest expenses of the taxpayer to that class. A taxpayer electing to use this safe harbor may not elect also to apply the operating division safe harbor in subparagraph (v) above; the operating division safe harbor in subparagraph (v) above cannot be applied to enable a taxpayer to qualify for this safe harbor. (vii) Combined Reports. Each member of a group of corporations filing a combined report may separately opt to apply the operating division safe harbor in subparagraph (v) or the entity-wide safe harbor in

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subparagraph (vi) above. Alternatively, for purposes of the entity-wide safe harbor in subparagraph (vi) above, all of the corporations filing a combined report may opt to be treated as a single taxpayer.

(c) Indirect attribution of residual non-interest deductions.

(i) Non-interest deductions that cannot be directly attributed as provided in section IV.A (3) (b) above (“residual non-interest deductions”) must be attributed to business, subsidiary and investment capital using either the combined asset and income method set out in subparagraph (ii) below, or if an election is made as provided for therein, the alternative asset method set out in (iii) below. The amount of residual non-interest deductions is determined by subtracting the amount of non-interest deductions attributed directly under section IV.A (3) (b) above from the total amount of attributable non-interest deductions.

(ii) Combined asset and income method.

(A) An amount of residual non-interest deductions determined

by multiplying residual non-interest deductions by the subsidiary capital combined percentage (defined in (v) below), must be indirectly attributed to subsidiary capital, and the income therefrom.

(B) An amount of residual non-interest deductions determined

by multiplying residual non-interest deductions by the investment capital; combined percentage (defined in (v) below), must be indirectly attributed to investment capital and income.

(C ) The excess of the amount of residual non-interest

deductions over the amount of residual non-interest deductions indirectly attributed pursuant to (A) and (B) above must be indirectly attributed to business capital and income.

(iii) Alternative Asset Method. (A) Method of Attribution

(a) The taxpayer must indirectly attribute to subsidiary capital and income an amount of residual non-interest deductions determined by multiplying residual non-interest deductions by the asset factor (defined in (iv) below) for subsidiary capital.

(b) The taxpayer must indirectly attribute to investment

capital and income an amount of residual non-interest deductions determined by multiplying residual non-interest deductions by the asset factor (defined in (iv) below) for investment capital.

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(c) The taxpayer must indirectly attribute to business capital and income the excess of the amount of residual non-interest deductions over the amount of residual non-interest deductions indirectly attributed pursuant to (a) and (b) above.

(B) Election. In order to use the alternative asset method to attribute its residual non-interest deductions, the taxpayer must elect to do so for both subsidiary and investment capital and the income therefrom on a return or amended return for the applicable tax year. A separate election must be made for each year. This election is irrevocable for each year with respect to which the election is made unless the filing status of the taxpayer as combined or separate is changed as a result of an audit or where a change in the composition of a combined group is made on audit. The taxpayer may not elect the alternative asset method for any year in which the value of the taxpayer’s total assets is not greater than zero. The taxpayer may elect the alternative asset method on an amended return provided that at the time it is filed, no audit has been commenced with respect to the year covered by the return. In the absence of a timely election the taxpayer must use the combined asset and income method specified in subparagraph (ii) above.

(iii) Computation of Asset and Income Factors.

(A) Asset Factor . The asset factor with respect to subsidiary capital is determined by dividing the average value of the taxpayer’s subsidiary capital, without reduction for liabilities attributable to subsidiary capital, by the total average value of all the taxpayer’s assets without reduction for liabilities. The asset factor with respect to investment capital is determined by dividing the average value of the taxpayer’s assets constituting investment capital, without reduction for liabilities attributable to investment capital, by the total average value of all the taxpayer’s assets without reduction for liabilities. If the value of a taxpayer’s assets constituting investment or subsidiary capital is not greater than zero and the total assets is greater than zero, the respective asset factor for that class is zero. For these purposes, real property and marketable securities must be valued at fair market value and the value of personal property other than marketable securities must be the value thereof shown on the books and records of the taxpayer in accordance with generally accepted accounting principles consistent with Administrative Code section 11-604.2. (B) Income factor. The income factor for subsidiary capital is determined by dividing the taxpayer’s gross income from subsidiary capital by its total gross income. The income factor for investment capital is determined by dividing the taxpayer’s gross income from investment capital by its total gross income. If a taxpayer’s gross income from investment or subsidiary capital is

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equal to zero and total income is greater than zero, the respective factor for that class is zero.

(a) For these purposes total gross income means gross income as defined in Internal Revenue Code section 61, increased by (a) those items described in such section 61 that are included in the computation of entire net income by reason of Administrative Code section 11-602.8(c), and (b) interest on State and local bonds excluded from gross income under Internal Revenue Code section 103. Gross income is not reduced by any deduction for capital losses or by any other deductions.

(b) Gross income from subsidiary capital is that portion of

total gross income consisting of dividends, interest, and gains (but not losses) from subsidiary capital.

(c) Gross income from investment capital is that portion

of total gross income consisting of dividends, interest , and gains (but not losses) from investment capital as well as items described in 19RCNY section 11-69(b), definition of Investment Income, (i) (B) through (E).

(iv) Computation of subsidiary and investment capital combined

percentages.

(A) The subsidiary capital combined percentage is computed by adding together two times the taxpayer’s income factor for subsidiary capital and the taxpayer’s asset factor for subsidiary capital and dividing the total by three. (The income and asset factors are defined in (iv) above.) (B) The investment capital combined percentage is computed by adding together two times the taxpayer’s income factor for investment capital and the taxpayer’s asset factor for investment capital and dividing the total by three. (C) In determining the subsidiary capital and investment capital combined percentages, if total gross income is zero, the subsidiary and investment capital combined percentages are equal to their respective asset factors. If total assets are not greater than zero, the subsidiary and investment capital combined percentages are equal to their respective income factors.

B. Examples The following examples illustrate the direct and indirect attribution of non-interest deductions to subsidiary, investment and business capital.

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Example 1: Each member of taxpayer’s accounting staff spend 40% of his or her time analyzing whether the taxpayer should restructure its subsidiaries. Each member of the accounting staff spends 20% of his or her time analyzing the taxpayer’s investment portfolio. The accounting staff does not spend any other time on issues relating to subsidiary or investment capital or income. The taxpayer attributes 40% of the accounting staff’s salaries and related employee benefit expenses and payroll taxes to subsidiary capital and 20% to investment capital. This method is acceptable.

Example 2: The facts are the same as in example 1. In addition, the accounting staff

occupies 10% of a building rented by the taxpayer. The other 90% is used for the taxpayer’s service business. All rental expense may, at the election of the taxpayer, be directly attributed to business capital pursuant to paragraph A(3) (b) (i) (A) (d). None of the rental expense would then be attributed to subsidiary or investment capital or income.

Example 3: The facts are the same as in example 1. The taxpayer has a total of 100

employees. Ten employees are in the accounting department. Each member of the accounting staff spends 40% of his or her time analyzing whether the taxpayer should restructure its subsidiaries and each member of the accounting staff spends 20$ of his or her time analyzing the taxpayer’s investment portfolio. Ten employees are in the personnel department. They are responsible for managing the hiring, salaries, pension and medical benefits of all employees. Of the remaining 80 employees, five spend 20% of their time on activities related to investment capital and 40% of their time on activities related to subsidiary capital. The other 75 employees spend no time on activities relating to subsidiary or investment capital. The 15 employees engaged in activities relating to investment and subsidiary capital (ten from the accounting staff and five others) represent 25% of the total payroll of the taxpayer other than the payroll of the personnel department.

The taxpayer attributes 5% (25% X 20%) of the salaries and related

employee benefit expenses and payroll taxes of the personnel department employees to investment capital and 10% (25% X 40%) to subsidiary capital. This method, based on time and payroll, is reasonable under the circumstances and is acceptable.

Example 4: The CEO of a corporation does not maintain detailed time records.

However, she does maintain a diary that shows that she spends approximately 20% of her time in planning the corporation’s strategy for investment in subsidiaries and 80% of her time in planning the corporation’s strategy for developing, manufacturing and marketing its products. The taxpayer may elect to attribute the CEO’s compensation package to business capital pursuant to paragraph A(3) (b) (i) (A) (m). None of the CEO’s compensation package would then be attributed to subsidiary (or investment ) capital.

Example 5: Income and Assets. Corp. X has $10,000 of business income,

$4,000 of business assets, $300 of income from subsidiary capital, $1,000

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of subsidiary assets, $500 of investment income and $2,000 of investment assets. (Assets here are calculated without reduction for liabilities.)

Expenses. Corp. X has $6,000 in non-interest expenses, of which

$3,500 is directly attributable to business capital and properly substantiated, including items on the list of expenses, which Corp X elects to attribute to business capital under paragraph A (3) (b) (i) (A) above.

Separate Operating Division. Corp. X has a manufacturing division

that qualifies as an operating division. $1,000 of the $6,000 of non-interest expenses are attributable to that division and are not included in the $3,500. Of that $1,000, $400 is wages and salaries, $100 is for equipment rental and depreciation, and $500 consists of items on the list in paragraph A (3) (b) (1) (A) above that Corp. X elects to directly attribute to business capital. Corp. X can substantiate that at least $950 of the $1,000 is directly attributable to business capital. Therefore, Corp. X may elect to attribute all $1,000 of the expenses of that division directly to business capital and does so elect.

The total of directly attributable expenses is $4,500. ($1,000 from the

division and $3,500 from the corporation as a whole.) Subsidiary and Investment Capital Combined Percentages Subsidiary: [$300/$10,800 (income) + $300/$10,800

(income) + $1,000/$7,000 (assets)] /3 = 6.61% Investment: [%500/$10,800 (income) + $500/$10,800

(income) + $2,000/$7,000 (assets)]/3= 12.61%

Indirect residual non-interest deductions of $1,500 ($6,000 less the $4,500 directly attributed to business) are attributed, 6.61% ($99.15) to subsidiary capital and 12.61% ($189.15) to investment capital. The remainder, $1,211.70 ($1500 – [$99.15 + $189.15]) is attributed to business capital. The total direct and indirect non-interest expense attribution is $5,711.70 to business, $99.15 to subsidiary and $189.15 to investment capital.

Example 6: Income and Assets. Corp. X has $10,000 of business income,

$4,000 of business assets, $300 of income from subsidiary capital, $1,000 of subsidiary assets, $500 of investment income and $2,000 of investment assets. (Assets here are calculated without reduction for liabilities.)

Expenses. Corp. X, a broker dealer, has $5,000 in non-interest

expenses, of which $2,000 is substantiated as compensation of account representatives, $1,000 is substantiated as for computer equipment and software and wire services used exclusively to manage customer accounts and execute customer transactions, $1,000 consists of items on the list in paragraph (A (3) (b) (i) (A) above the Corp. X elects to directly attribute to business capital and $500 is substantiated as directly attributable to investment capital.

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The total of directly attributable expenses is $4,500. ($4,000 to business

capital and $500 to investment capital) Subsidiary and Investment Capital Combined Percentages. Subsidiary: [$300/$10,800 + $300/$10,800 +

$1,000/$7,000]/3 = 6.61% Investment: [$500/$10,800 + $500/$10,800 +

$2,000/$7,000 = 12.61% Indirect residual non-interest expenses of $500 are attributed 6.61%

($33.05) to subsidiary capital and 12.61% ($63.05) to investment capital. The remainder, $403.90, ($500 – [$33.05+63.05)] is attributed to business capital.

The total direct and indirect non-interest expense attribution is $4,403.90

to business, $33.05 to subsidiary and $563.05 to investment capital.

Office of Tax Audit and Enforcement Division

Business Title Name Office Work Email

Tax Audit & Enforcement Division Deputy Commissioner Harry Leonard 718-488-2255 LeonardH@finance.nyc.gov

Audit Assistant Commissioner Cesar Bencosme 718-488-2228 BencosmeC@finance.nyc.govQuality Analysis Group (Non-Field Audit & Voluntary Disclosure) Senior Director Samuel Blaize 718-488-2152 BlaizeS@finance.nyc.govMetro Units (Sales Tax & Personal Income Tax) Senior Director Corine Phillips 718-488-2122 PhillipsC@finance.nyc.gov

Business Income Taxes (BIT) Director Kin Chan 718-488-2236 ChanK@finance.nyc.gov

Excise Tax (Real Property Transfer Tax, Commercial Rent Tax & Hotel Tax, Bankruptcy & Utility Tax) Director Robertsanti Curro 718-802-2928 CurroR@finance.nyc.gov

Sales and Use Tax Director Perotti, John 718-488-2121 PerottiJ@finance.nyc.gov

Personal Income Tax Director Joel Stern 718-488-2132 SternJ@finance.nyc.gov

Enforcement Director Robert Eisman 718-488-2454 EismanR@finance.nyc.gov

April 30, 2015

Generall A new Subchapter 3-A is created in Chapter 6 of Title 11 of the Administrative Code of the City of New

York (the “Code”) to apply for tax years starting on or after January 1, 2015. This new subchapter ap-plies to corporations currently subject to the General Corporation Tax (“GCT”), codified as Subchap-ter 2 of Chapter 6 of Title 11 of the Code, and the Banking Corporation Tax (“BCT”), codified asSubchapter 3 of Chapter 6 of Title 11 of the Code, except that it does not apply to any corporation thatis an S corporation, or a qualified subchapter S subsidiary, under subchapter S of the Internal Rev-enue Code of 1986, as amended (collectively, “S Corporations”). [Bill §§ 1, 3 and 4; Code §§ 11-602.1 and 11-639(a) and Code § 11-651]

l S Corporations continue to be subject to tax under the current GCT and BCT. [Bill §§ 1, 3 and 4; Code§§ 11-602.1, 11-639(a) and 11-651]

l Subchapter 3-A, which is modeled on the existing GCT in Subchapter 2, incorporates (with necessarymodifications) statutory amendments made to the State’s corporate franchise tax under Article 9-A inthe New York State 2014-2015 and 2015-16 enacted budgets. Provisions from the GCT that are nowobsolete are labelled “intentionally omitted” in Subchapter 3-A, to maintain parallel numbering be-tween Subchapters 2 and 3-A.

l Subchapter 3-A continues to phase out the three-factor income allocation formula, which is also tak-ing place under Subchapter 2. The last year of the phase out will be 2017. Starting in 2018 there willbe a single receipts factor for income allocation, except that taxpayers with less than $50 million of re-ceipts allocated to the City will have a one-time election to continue using the 2017 three-factor for-mula under Subchapter 3-A. [Code §§ 11-604(3)(a)(10) and 11-654(3)(a)(10)]

Corporations Subject to Tax [Bill §1; Code § 11-653] l Subchapter 3-Aunifies the taxation of general corporations and banking corporations, which means that

C corporations currently subject to the GCT and BCTwill become subject to the new corporate tax. Sub-chapter 3-A does not apply to S corporations, insurance corporations, and publicly supervised utilities.

l Nexus standards.u Retains existing nexus standards for the privilege of doing business, employing capital, owning

or leasing property, or maintaining an office, as well as the BCT credit card nexus standard of onethousand customers, by mailing address and merchant locations.

u Clarifies that alien corporations not deemed domestic under the Internal Revenue Code (IRC)with no effectively connected income (ECI) computed pursuant to IRC §882 are not subject totax. In addition, such alien corporations are excluded from the combined group. [Bill §1; para-graph (c) of subdivision 2 of Code §11-654.3]

Finance

TM NEW YORK CITYCORPORATE TAX REFORM OUTLINE

Part D of Chapter 60 of the Laws of 2015

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n Alien corporations are defined as corporations organized under the laws of a country, or anypolitical subdivision thereof, other than the United States, or organized under the laws of a pos-session, territory, or commonwealth of the United States.

Classification of Income and Expenses Business Income [Bill § 1; subdivisions 6 through 8 of Code § 11-652, unless otherwise noted]l The starting point for the business income base is federal taxable income (FTI) for U.S corporations

and ECI for alien corporations not deemed domestic under the IRC. u Taxpayers are required to add back treaty benefits to ECI, consistent with the current treatment

of alien banks under the BCT.u The requirement that taxpayers add back the amount of foreign taxes paid is eliminated. u Most of the other existing GCT modifications are continued.

l The current exemptions for income from subsidiary capital and 50% of dividends from non-subsidiariesare eliminated.u The income is re-classified as investment income, other exempt income, or business income.

l Business income equals entire net income (ENI), minus investment income and other exempt income.l Business income includes the following:

u interest income and gains and losses from debt instruments or other obligations, unless the incomecannot be included in allocable business income under the U.S. Constitution;

u gains and losses from stock of a corporation conducting a unitary business with the taxpayer; u dividends and gains and losses from stock held in a non-unitary corporation for one year or less

or otherwise not qualifying as investment capital, u dividends and gains from stocks that do not qualify as investment income because gross invest-

ment income exceeds 8% of ENI; and u income from cash.

l To prevent the overcapitalization of non-life insurance corporations under the new subchapter, theCommissioner of Finance is provided with discretionary powers to make a “deemed distribution” ofnon-premium income from overcapitalized non-life insurance corporations to the affiliated Subchap-ter 3-A corporations to properly reflect the activities of the unitary business. [Bill § 1; Code § 11-655(5)]

l Regulations will be promulgated by the Commissioner of Finance to address partnership items of re-ceipts, income, gain, loss, and deduction that flow through a partnership to a corporate partner aswell as gains or losses from the sale of a partnership interest itself. The City intends to be consistentwith the State with respect to these regulations. [Bill § 1; Code §§ 11-653(1)(f)) and 11-654(4-a)]

l Allocated business income is the amount subject to tax. [Bill § 1; Code §11-654(1)(a)(1)] Investment Income [Bill § 1; Code § 11-652(4) and 652(5), unless otherwise noted] l The current GCT definition of investment income is narrowed to include only income from stocks of

New York City Department of Finance April 30, 2015

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non-unitary corporations held for investment for more than one year and that satisfy the definition of cap-ital asset under section 1221 of the Internal Revenue Code (IRC) at all times during the year, would gen-erate capital gain or loss upon disposition, are clearly identified as held for investment in the samemanner required under IRC section 1236(a)(1) (whether or not the taxpayer is a dealer), and, for allstock acquired after January 1, 2015, have never been held for sale to customers. Income that can-not be included in allocable business income under the U.S. Constitution is also investment income.u If stock was not subject to the identification requirements of IRC section 1236(a), but would otherwise

qualify as investment capital, the taxpayer has until October 1, 2015 to identify it as an investment. u Stock is defined as an interest in a corporation that is treated as equity for federal income tax pur-

poses. [Bill § 1; Code § 11-652(3-a)]u Solely for purposes of the definition of investment capital and investment income, if the taxpayer

owns or controls, directly or indirectly, less than 20% of the voting power of the stock of a corpo-ration, the corporation is presumed to not be conducting a unitary business with the taxpayer.n The unitary determination for corporations 20% or more owned is fact-specific, with no presumption.

l The one year holding period for stocks is measured across tax years. u Where the holding period is split across tax years, a taxpayer may presume that it held the stock

for more than one year, but, if the taxpayer does not own the stock at the time it actually files itsoriginal report for the taxable year in which it acquired the stock, the presumption shall not applyand the actual period of time the taxpayer owned the stock shall determine its character.

u If the stock is not held for more than one year, the dividends and gains and losses from the stockgenerated in year 1 and year 2 are required to be included as business income in year 2, and busi-ness capital must be increased in year 2 for the amount included as investment capital in year 1.

l Gross investment income cannot exceed eight percent of the taxpayer’s ENI.

Other Exempt Income [Bill § 1; Code § 11-652(5-a)] l The new other exempt income category of income is defined as the sum of exempt CFC income and

exempt unitary dividends.u Exempt CFC income is income received from a controlled foreign corporation that is conducting

a unitary business with the taxpayer but is not included in the combined group.n This includes Subpart F income and I.R.C. §956 dividends.

u Exempt unitary dividends are dividends from unitary corporations not in the combined group be-cause they are: (1) taxable under another tax chapter, (2) alien corporations not deemed domes-tic with no ECI, (3) insurance corporations that are not taxable under Subchapter 3-A, or (4) lessthan 50% directly or indirectly owned by the taxpayer.

Attribution of Expenses [Bill § 1; subdivisions 5, 5-a and 7 of Code § 11-652, unless otherwise noted] l Investment income and other exempt income are not taxable, and the deductions for interest expenses

attributable to such income are disallowed. u If actual interest expense attribution exceeds income, the excess expenses are required to be

New York City Department of Finance April 30, 2015

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added back to income. u In lieu of computing actual interest expenses disallowed, taxpayers generally may make a revo-

cable election to reduce investment income and other exempt income by 40%.n If the election is made, it applies to both investment income and other exempt income.n If the election is revoked, the revocation applies to both investment income and other exempt income. n Taxpayers receiving dividends from unitary affiliates subject to tax under the City’s Utility Tax,

other than vendors of utility services, or affiliates that would have been subject to the City’sformer insurance corporation tax, are precluded from making the 40% election for those div-idends and must perform actual expense attribution.

u The computation of interest expense attribution for a combined group is done on a “one com-pany” basis. If the taxpayer chooses the 40% election, it applies to both the investment incomeand other exempt income of all members of the combined group. [Bill §1 ; paragraph (e) of sub-division 4 of Code § 11-654.3]

Tax Bases and Rates Bases

l The business income base is the primary tax base, and the business capital and fixed dollar minimumtax bases are alternative minimum tax bases.

l The GCT alternative minimum tax on income plus compensation, the BCT alternative entire net incomebase, the BCT taxable assets base, and the BCT fixed dollar minimum tax are not included in Sub-chapter 3-A. [Bill § 1; subparagraph (a) of paragraph E of subdivision 1 of Code § 11-654]

l The separate tax on subsidiary capital is repealed. [Bill § 1; subparagraph (a) of paragraph E of sub-division 1 of Code § 11-654]

Business Income Base Tax Rates [Bill § 1; clause (i) of subparagraph (a) of paragraph E and paragraphsJ and K of subdivision 1 of Code § 11-654]

New York City Department of Finance April 30, 2015

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Type of Business Rate in Tax Year 2015 and thereafterQualified Manufacturing Corporations 4.425% - 8.85% Small businesses 6.5% - 8.85%Financial corporations 9%Remaining taxpayers 8.85%

- The tax rate for qualified manufacturing corporations phases out between $10 and $20 millionof allocated business income and $20 and $40 million of business income before allocation.

- The tax rate for small businesses phases out between $1 and $1.5 million of allocated busi-ness income and $2 and $3 million of business income before allocation.

l Qualified manufacturing corporations must meet property and receipts tests:u The taxpayer must have property in New York State that is principally used in the production of

goods by manufacturing and either the adjusted basis of that property for federal income tax pur-poses is at least $1,000,000 or more than 50% of all its real and personal property is located inthe state, and

u The taxpayer must derive more than 50% of its gross receipts from the sale of goods producedby its manufacturing activity.

u In the case of a corporation that is a member of a combined group, the determination is made ona combined group basis.

u No modification for large manufacturing employer is included. [Bill § 1; Code § 11-654(1)(K)] l Small businesses qualify depending on their level of business income.l Financial corporations are corporations, or combined groups, that have more than $100 billion of total

assets reflected on their balance sheet, computed under GAAP, at the end of the taxable year, and:u More than 50% of their overall receipts allocated pursuant to the rules under Code § 11-654.5(5),

which allocate receipts from certain financial assets and certain financial activities, (including re-ceipts from qualified and nonqualified financial instruments and commodities, and registered bro-ker-dealer services, credit and consumer cards, and investment company services), or

u A registration or classification as a financial institution (such as a bank, savings or thrift associa-tion registered broker dealer, or agency, branch or foreign depository) except that, in the case ofa combined group, more than 50% of the assets of the group must be held by one or more cor-porations with a financial registration or classification.

Capital Base Tax Rates [Bill § 1; clause (ii) of subparagraph (a) of paragraph E of subdivision 1 of Code§ 11-654]

New York City Department of Finance April 30, 2015

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Type of Business Rate in Tax Year 2015 and thereafterCooperative housing corporations 0.04%All other corporations 0.15%Modification: the portion of total businesscapital directly attributable to stock in asubsidiary that is taxable as a utility withinthe meaning of the New York City Utility Taxor would have been taxable as an insurancecorporation under the former New York CityInsurance Corporation Tax 0.075%

- The maximum tax is $10,000,000.- A $10,000 reduction applies to all capital tax calculations (provided that the capital tax cannotbe less than $0).

Fixed Dollar Minimum (FDM) Amounts [Bill § 1; clause (iii) of subparagraph (a) of paragraph E of subdivi-sion 1 of Code § 11-654]

Allocation of Business Income [Bill §1; Code § 11-654.2, unless otherwise noted] l A single receipts factor apportionment methodology is being phased-in on the same schedule as the

current GCT and will be fully effective for tax years beginning on or after January 1, 2018. l Customer sourcing rules determine whether receipts are derived from activity within the City for pur-

poses of the receipts factor. l Taxpayers with less than $50 million of receipts allocated to the City will have a one-time election to

continue, in their first tax year commencing on or after January 1, 2018, to use the 2017 three factorbusiness allocation percentage formula – 93% sales, 3.5% property, 3.5% payroll – to allocate in-come in tax years beginning on or after January 1, 2018. [Bill § 1, Code § clause (xii) of subparagraph10 of paragraph (a) of subdivision 3 of 11-654]

l Receipts from sales of electricity are sourced to the delivery location. l Net gains (not less than zero) from sales of real property are sourced to the location of the property. l Royalties from the use of patents, copyrights, trademarks and similar intangibles are sourced to the

City if such intangibles are used within the City. l Receipts from digital products are generally sourced to the customer’s primary use location of the product.

New York City Department of Finance April 30, 2015

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If New York City receipts are: Fixed dollar minimum tax is: Not more than $100,000 $25 More than $100,000 but not over $250,000 $75 More than $250,000 but not over $500,000 $175 More than $500,000 but not over $1,000,000 $500 More than $1,000,000 but not over $5,000,000 $1,500 More than $5,000,000 but not over $25,000,000 $3,500 More than $25,000,000 but not over $50,000,000 $5,000 More than $50,000,000 but not over $100,000,000 $10,000More than $100,000,000 but not over $250,000,000 $20,000More than $250,000,000 but not over $500,000,000 $50,000More than $500,000,000 but not over $1,000,000,000 $100,000More than $1,000,000,000 $200,000

A corporation’s “New York City receipts” are the same as its New York City receipts for purposesof computing its business allocation percentage. If a return is filed for a period of less thanone year, the minimum tax may be reduced.

l New sourcing rules are created for allocating income from financial instruments. u Qualified financial instruments (QFIs) are loans (except loans secured by real estate), federal,

state and municipal debt, asset backed securities and other government agency debt, corporatebonds, stock (except stock that is investment capital), partnership interests, physical commoditiesand other financial instruments not otherwise enumerated in the statute that are marked to mar-ket under IRC §475 or §1256. n If, in any particular year, only loans that are secured by real property are marked to market,

then no loans are QFI for that year. n If a financial instrument is not itself marked to market, but is in the same allocation category

as another financial instrument that is marked to market, then it is also a QFI. n In the case of a combined report, the definition of QFI is determined on a combined basis.

u Taxpayers can use one of two sourcing methods for QFIs: n use customer-based sourcing for each income stream that does not constitute tax exempt in-

come; or n elect to treat all income from QFIs as taxable business income and allocate 8% of the net income

(dividend income, interest income, and net gains), not less than zero, from QFIs to the City. z The irrevocable 8% QFI election must be made on an annual basis on the taxpayer’s

original, timely filed return (determined with regard to extensions) and applies to all theQFI income of all members of a combined group.

u Non-qualified financial instruments (non-QFIs) are all financial instruments that do not meet thedefinition of QFI and the related income is subject to customer-based sourcing.

l In cases where sourcing rules for financial transactions rely on commercial domicile, taxpayers are re-quired to use the following hierarchy:u seat of management and control; and u billing address of the customer.

l Receipts constituting the primary spread of selling concession from underwritten securities are sourcedto the customer’s location.

l Receipts from credit card authorization processing and clearing and settling processing are sourcedto the location where the credit card processor’s customer accesses the processor’s network.All othercredit card processing receipts are sourced to the City using the average of 8% and the percentageof New York City access points.

l Receipts from services are generally sourced to the City if the customer receives the benefit of theservice in the City.

l The special apportionment rules for trucking, railroad, transportation of gas through pipes, and avia-tion are used as the bases for the new receipts rules for these industries.

l Current sourcing rules continue generally for: u sales of tangible personal property;

New York City Department of Finance April 30, 2015

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u rentals of real and tangible personal property; u broker/dealer activities, except as described above; u interest, fees, penalties, service charges, merchant discounts, and credit card fees; u services provided to a Regulated Investment Company (RIC); and u advertising.

Combined Reporting [Bill § 1; Code § 11-654.3, unless otherwise noted] l Subchapter 3-A adopts a unitary method for combined reporting. l In order to be combined, corporations must:

u Conduct a unitary business; and u Meet a more than 50% stock ownership test that is based on voting power.

n This is satisfied when one corporation directly or indirectly owns more than 50% of another,or corporations are controlled by a common interest or by related parties through more than50% stock ownership.

l The substantial intercorporate transactions test is eliminated. l The combined group must include all domestic corporations, alien corporations deemed domestic

corporations under the IRC (contiguous, stapled, and inverted corporations), alien corporations withECI, captive REITs and RICs, and combinable captive insurance companies. u The captive REIT/RIC combination requirement is incorporated without any special exclusion for

affiliated groups whose members own assets under $8 billion. u The combined reporting requirements for captive insurance companies is changed to require com-

bination with captive insurance companies, where less than 50% of the captives’ premiums are fromarrangements that constitute insurance for federal income tax purposes. [Bill § 1; Code § 11-652(12)]

l Combination across tax types remains prohibited. l Eventual single receipts factor apportionment for all taxpayers (see Allocation of Business Income

above) allows aviation, railroad, and trucking companies to be included in the combined group.l Taxpayers can also make an irrevocable commonly owned group election that requires combined re-

porting for a 7 year period.u The group must include all unitary and non-unitary corporations that could be taxed under Sub-

chapter 3-A and that meet the more than 50% stock ownership test. u The election must be made when the original return is timely filed (determined with regard to ex-

tensions) and may not be revoked during the 7 year period. n Upon expiration, the election is automatically renewed for another 7 years unless the group

affirmatively declines to renew. If the election is affirmatively declined, a new election cannotbe made for 3 years.

u Each corporation in the group is deemed to have agreed to treat the income from the non-unitary

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businesses as if it were from the group’s unitary business and any corporation conducting a non-unitary business that is acquired during that period that could be taxed under Subchapter 3-A isincluded in the combined group for the remainder of the election period.

l The combined group is generally treated as if it were a single entity.u Each taxpayer member of the combined group is liable for the group's whole tax, not just its pro-

rata share of the combined group's tax. u The combined group must designate one taxpayer member to be the agent for administrative pur-

poses (e.g., filings, assessments, payments, and waivers). u The combined group’s tax is the sum of (1) the greater of the tax on combined business income,

the tax on combined business capital, or the fixed dollar minimum tax of the agent and (2) the fixeddollar minimum tax for every other taxpayer member of the group.

u Generally, combined income is computed using the federal intercorporate deferral rules. u Credits, prior net operating loss conversion subtractions, and net operating loss deductions can

be used by the group, not just the corporation that generated the item, and are applied in com-puting the combined tax.

Prior Net Operating Loss Conversion (PNOLC) Subtraction [Bill § 1; subdivision 2 of Code § 11-654.1] l Net operating losses (NOLs) that were incurred before the 2015 tax year are converted into a PNOLC

subtraction to stabilize their value for financial accounting purposes. u Taxpayers must first compute the value of the unabsorbed NOL for the base year.

n This is computed by applying the taxpayer’s (or combined group’s) 2014 business allocationpercentage and tax rate to the 2014 pre-apportionment New York City NOL carryforward.

n The product is then divided by 8.85% or 9%, as applicable. n The final result is referred to as the PNOLC subtraction pool.

u Taxpayers have a choice to use 1/10 of the PNOLC subtraction pool in each year for the next 20 yearsor until it’s exhausted, whichever is first, or use 1/2 of the PNOLC subtraction pool in each tax year be-fore the pool is exhausted, within the period beginning January 1, 2015 and ending December 31, 2016. n If taxpayers cannot use the entire 1/10 allotment of subtraction in one year, the unused por-

tion is carried forward into future years and added to the amount allowed in subsequent years.z Years where the subtraction cannot be used still count in determining the 20 year period, in-

cluding any tax year after January 1, 2015 that the taxpayer is subject to Subchapter 2 or 3.u If taxpayers choose to deduct 1/2 of the subtraction in the 2015-2016 period, any unused amount

is lost after 2016. u Where two or more taxpayers and/or groups that existed and filed separately in tax year 2014 con-

stitute one group in 2015, each taxpayer and/or group would compute its PNOLC subtraction sep-arately based on its 2014 information; in 2015, the group’s total PNOLC subtraction is the sum ofthe subtractions of each of its constituent taxpayers and/or groups.

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n If a taxpayer leaves the group after 2015, the taxpayer takes its proportionate amount of thesubtraction with it.

n If a taxpayer enters the group after 2015, its proportionate amount of the subtraction is addedto the group’s remaining subtraction amount.

u The PNOLC subtraction is deducted from allocated business income before the net operatingloss deduction.

u Taxpayers only have to use the amount of PNOLC subtraction necessary to bring the tax on busi-ness income down to the higher of the tax measured by capital or the fixed dollar minimum tax.

NOL Deduction [Bill §1; subdivision 3 of Code § 11-654.1] l The following rules apply to NOLs incurred in tax years beginning on or after January 1, 2015:

u A taxpayer’s NOL deduction (NOLD) in any specific tax year would be the sum of allocated busi-ness losses that were incurred in tax years beginning on or after January 1, 2015, less any portionof such losses that were deducted as a NOLD in a prior tax year.

u The NOLD is no longer limited by the federal NOLD source year or amount. u The NOLD is a deduction against allocated business income and is applied after the PNOLC subtraction. u Taxpayers only have to use a NOLD in an amount necessary to bring the tax on business income

down to the higher of the tax measured by capital or the fixed dollar minimum tax, with excess NOLcarried forward.

u NOLD is not allowed for a NOL sustained during any year in which the corporation generating theloss was not subject to tax under Subchapter 3-A.

u NOLs can be carried back 3 years, provided no NOL earned in 2015 or later can be carried backto a tax year before 2015, and must be carried back to the earliest year first.n Taxpayers may make an irrevocable election on the original, timely filed return (determined

with regard to extensions) for the year of the loss to relinquish the entire carryback period. u NOLs can be carried forward for as many as 20 years and must be carried forward to the earliest year first. u The current separate return limitation year (SRLY) rules used when corporations enter or leave a

combined group are continued.

Tax Credits [Bill §1; Code § 11-654(12) through (21)] l GCT credits are transitioned into Subchapter 3-A, except for obsolete credits.l Subchapter 3-A provides for the carry forward of credits that were allowed under Subchapter 2 in tax

years prior to January 1, 2015. The credit in Subchapter 3-A for Unincorporated Business Taxes paidis modified to take into account the elimination of the alternative income plus compensation base andalso the varying tax rates provided for small corporations and manufacturing corporations.

Bank-Specific Provisions l Eliminates special bank specific provisions, including: [Bill § 1]

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u the international banking facilities provisions, andu the deduction for interest income from government obligations.

l In an effort to encourage local lending in the City, four new ENI modifications are created. u The first modification is available to small thrifts and qualified community banks for holding a sig-

nificant amount of New York City small business loans and New York City residential mortgages.[Bill § 1; Code§ 11-652.8(q)] n Eligible taxpayers must choose between this modification and the third modification discussed below.

u The second modification is available to small thrifts and qualified community banks that main-tained a REIT on April 1, 2014. [Bill § 1; Code § 11-652.8(r)]n Taxpayers that use this modification are precluded from using the two other modifications dis-

cussed above and below.u The third modification is available to thrifts and qualified community banks holding a qualified res-

idential loan portfolio. [Bill § 1; Code § 11-652.8(s)]n Eligible taxpayers must choose between this modification and the first modification discussed above.

u The fourth modification is available for taxpayers and combined groups that have less than $150billion of assets and make or purchase (immediate after origination) loans secured by residen-tial real property in the City used for affordable housing or located in a low income community.[Bill § 1; Code § 11-652.8(t)]n A phase-out applies between $100 billion and $150 billion of assets.n Taxpayers may not include loans in this modification that are incorporated into the first modifica-

tion and may not include income in this modification that is included in the second modification.

Legacy GCT Provisions That Are Unique to New York Cityl An entity that would otherwise meet the definition of a corporation but that was subject to the Unin-

corporated Business Tax (“UBT”) for its taxable year beginning in 1995 and that made an election notto be characterized as a corporation under the GCT, will also not be a corporation under Subchapter3-A unless and until it revokes its election. [Bill § 1, Code § 11-652(1)(b)]

l An entity characterized as a partnership for federal income tax purposes is not a corporation. [Bill §1, Code § 11-652(1)(c)]

l The application of Subchapter 3-A is not modified for Domestic International Sales Corporations.l ENI is modified to (1) exclude a partner’s share of income, gain, loss, or deduction from a partner-

ship that is subject to tax as a utility under Chapter 11 of Title 11 of the Code, (2) add back taxes paidunder Articles 9 and 13-A of the Tax Law, (3) add back relocation expenses to the extent the taxpayertakes a Relocation Employment and Assistance Credit or a Lower Manhattan Relocation and Em-ployment Assistance Program, (4) add back any deduction for a restricted stock option grant or exer-cise within the meaning of the IRC of 1954 unless the grantee disposes of the stock within 2 years fromthe grant date or 6 months from the stock transfer, (5) permit a deduction for certain expenses relatedto industrial waste treatment facilities and pollution control facilities, and (6) adjust the depreciation de-

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ductions attributable to certain sport utility vehicles. [Bill § 1, paragraph (a-1), subparagraphs (3), (4-b), (4-c) and (7) of paragraph (b), and paragraphs (g), (k) and (o) of Code § 11-652(8)]

l ENI does not include any modifications specific to publicly supervised utilities, which are exempt fromtax under Subchapter 3-A.

l Captive REITs and RICs that are combinable with insurance companies under Article 33 of the Tax Law(NYS Insurance Tax) are not excluded from tax under Subchapter 3-A. [Bill § 1, Code § 11-653(5)(a)]u Captive REITs and RICs are eligible for combination with other corporations under Subchapter 3-

A, even if they are combined with an insurance company under Article 33 of the Tax Law. [Bill §1, Code § 11-654.3(2)(c)]

l An exemption applies to all companies subject to the Utility Tax under Chapter 11 of Title 11 of the Code,not just those that are subject to tax under Articles 183 and 184 of the Tax Law. [Bill § 1, Code § 11-653(4)]u The exemption for vendors of utility services is proportionate to their share of receipts subject to

tax under the New York City Utility Tax and is therefore partial. [Bill § 1, Code § 11-653(4)].l An exemption applies for certain entities that hold title to real estate for organizations that are exempt

from tax under section 501(c) of the IRC. [Bill § 1, Code § 11-653(9)]l Except for business income tax rates applicable to small businesses and manufacturers, and the cap-

ital tax rates applicable to subsidiaries of publicly supervised utilities and insurance corporations, thecurrent tax rates applicable to income and capital continue to apply (see Business Income Base TaxRates and Capital Base Tax Rates above).

l The three-factor business allocation percentage continues to phase out the property and payroll fac-tors through the 2017 tax year, with the exception noted in Allocation of Business Income above. [Bill§ 1; Code §§ 11-654(3) and 11-654.3(5)(a)]

l Depreciation recapture applies to certain assets that were eligible for New York City depreciation de-ductions in excess of federal depreciation deductions. [Bill § 1, Code § 11-654(3)(d) and (e)]

l The allocation of receipts from aviation does not include any subtraction from local receipts. [Bill § 1,Code § 11-654.2(7)]

l No company subject to the Utility Tax under Chapter 11 of Title 11 of the Code is eligible for combi-nation (except for vendors of utility services). [Bill § 1, Code § 11-654.3(2)(c)]

l Reports regarding federal or state changes include “or other basis of tax”, war loss recoveries, waiverson restrictions to assessment and collection of federal or New York State tax, and changes to New YorkState sales or use tax liability. [Bill § 1, Code § 11-655(3) and (8)]

l The default interest rate for underpayments is 7.5%. [Bill § 1, Code § 11-656(1)(b)]l An initial installment equal to 25% of the tax liability for the preceding taxable year must be paid with

the report for the preceding year (or application for extension of time to file). [Bill § 1, Code § 11-658(1)]l The default interest rate for overpayments related to the 25% installment is 4% and the default interest

rate for extensions of time to pay installments of estimated tax is 7.5%. [Bill § 1, Code § 11-658(1) and (9)]

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12

Other unique New York City provisionsl Subchapter 3-A specifically defines IRC and partnership with reference to the current IRC. [Bill § 1,

subdivisions 11 and 13 of Code § 11-652]l Certain taxpayers that have less than $50 million of receipts allocated to the City may make a one-

time revocable election to continue using a 3 factor formula for income allocation (see Allocation ofBusiness Income above).

l Subchapter 3-A does not include an exception to the PNOLC limitations for taxpayers subject to thesmall business tax rate. [Bill § 1, Code § 11-654.1(2)(b)]

l Subchapter 3-A does not provide for the carryover of net operating losses incurred under the GCT orBCT after January 1, 2015. [Bill § 1, Code § 11-654.1(3)(e)]

l The statutes of limitations applicable to assessments and refunds in connection with New York Statechanges of income are revised to permit the City and taxpayers to make income allocation adjustmentsbased on New York State income allocation adjustments, [Bill §§ 10 and 16; Code §§ 11-674.3(g) and11-678.3(c)]

l No penalty will apply to a late declaration or underpayment of estimated tax due prior to or on June15, 2015 under Section 1 of the Act, if the declaration and payment are made in full by the first duedate after June 15, 2015 on which an installment of estimated tax is required to be paid, together withall other such declarations and payments then due. [Bill § 27]

Effective Date [Bill § 29]l These provisions are effective for taxable years beginning on or after January 1, 2015.

Remaining Amendments l Remaining sections amend cross-references and repeal obsolete provisions.

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10/29/15, 4:25 PMCorporate Tax Reform

Page 1 of 2https://www.tax.ny.gov/bus/ct/corp_tax_reform.htm

Department of Taxation and Finance

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Corporate Tax Reform

The 2014-15 New York State Budget enacted on March 31, 2014, contains the most significant reform of NewYork State’s corporate tax system since the 1940s. (Part A of Chapter 59 of the Laws of 2014). The changes aregenerally effective for tax years beginning on or after January 1, 2015. The new structure:

modernizes and streamlines the tax code,creates clarity and certainty, andaddresses the most common areas of dispute between taxpayers and the Tax Department.

The reform plan also includes tax cuts that bring the corporate tax rate to the lowest level since the late 1960s.

The 2015-16 New York State Budget enacted on April 13, 2015, contains technical and clarifying amendments tothe corporate tax reform statute enacted in 2014. (Part T of Chapter 59 of the Laws of 2015). These technical andclarifying amendments are effective for tax years beginning on or after January 1, 2015.

Bank Tax and Corporate Franchise Tax have been merged

Prior to reform, New York taxed banks and other financial institutions under separate tax articles. This structurefailed to accommodate dramatic changes in the financial services industry that allowed banks and other financialinstitutions to offer services that were essentially the same. As a result, taxpayers engaged in similar activitieswere subject to different tax rules. Separate articles also provided opportunities to exploit the differencesbetween the two tax articles. Merging the Bank Tax with the Corporate Franchise Tax reflects the modernlandscape of New York’s leading industry.

Easier to do business in New York State

The reforms also eliminate impediments to locating or expanding a business in New York State. These new rulesrecognize the shift to a service and knowledge-based economy by adopting a comprehensive market state taxsourcing approach. This will encourage companies to capitalize on New York’s highly educated and creativeworkforce and robust technology infrastructure without increasing their tax burden.

Draft Regulations

The Department of Taxation and Finance is currently in the process of updating its Business CorporationFranchise Tax Regulations to incorporate the changes made by the corporate tax reform legislation contained inthe 2014-2015 and 2015-2016 enacted New York State Budgets. Prior to the State Administrative Procedureprocess to formally propose and adopt these regulations, the Department is seeking public comment on the draftrules. To review the draft rules and provide public comment, see Corporate tax reform draft regulations.

Additional Information

For more information on the changes included in the corporate tax reform legislation see:

10/29/15, 4:25 PMCorporate Tax Reform

Page 2 of 2https://www.tax.ny.gov/bus/ct/corp_tax_reform.htm

Summary of Tax Provisions in SFY 2014-15 Budget for an explanation of the corporate tax reformlegislation enacted in 2014Summary of Tax Provisions in SFY 2015-16 Budget for an explanation of the technical and clarifyingamendments made to the corporate tax reformstatute in 2015New York State Corporate Tax Reform Outline (only reflects Part A of Chapter 59 of the Laws of 2014)Corporate Tax Reform FAQsTSB-M-15(2)C, Transitional Filing Provisions for Taxpayers Affected By Corporate Tax Reform LegislationTSB-M-15(4)C, (5)I, Investment Capital Identification Requirements for Article 9-A Taxpayers

The 2015-16 New York State Budget generally conformed the New York City tax law to the recently reformedNew York State corporate franchise tax. For more information, see New York City Corporate Tax Reform.

How to ask a question about corporate tax reform

If you have a question about corporate tax reform, you may submit a question to our Corporate Tax ReformWorking Group. The question will be reviewed and any answer provided will be published on our Corporate TaxReform FAQs Web page.

Sign up for our Subscription Service for email updates about corporate tax reform or check this page again.

Updated: October 06, 2015

These FAQs are meant to provide general guidance on topics of interest to taxpayers. However, taxpayersshould be aware that subsequent changes in the Administrative Code or its interpretation may affect the ac-curacy of an FAQ. The information provided in these FAQs does not cover every situation and is not intendedto replace the law or change its meaning. These FAQs clarify corporate tax reform legislative amendmentsthat take effect for taxable years beginning on or after January 1, 2015, unless otherwise stated

BUSINESS CAPITAL1. Does business capital include the capital that generates other exempt income?

Yes, because this capital may also generate taxable business income, such as capital gains from thesale of stock in a unitary corporation that is not included in a combined report with the taxpayer.

BUSINESS INCOME BASE1. Are Internal Revenue Code Section 78 gross-up dividends included in the business income

base?Our current policy of excluding these dividends from Entire Net Income is being continued. See Ad-ministrative Code section 11-652(8)(a)(2-a).

2. What constitutes a small business for determining whether a small thrift or community bank hasmade a “small business loan” for purposes of the subtraction modification under Administra-tive Code section 11-652(8)(q)? A loan will be considered a “small business loan” if made to an active business that has had, for fed-eral income tax purposes, an average number of full-time employees of 100 or fewer, not including gen-eral executive officers, and gross receipts of not greater than $10,000,000 in its immediately precedingtaxable year. In the event that the entity applies for the loan in its first year of operations, satisfactionof the requirements in the preceding sentence is determined by the employees, receipts and assets ofthe business on the date of the loan application. In addition, the business may not be part of an affili-ated group, as defined in section 1504 of the Internal Revenue Code, unless the group would have it-self met, as a group, the active business, employee and the gross-receipts requirements. A businessqualifies as an active business if the value of the financial instruments described in Section 11-654.2(5)(a) of the Administrative Code of the City of New York that it holds for investment does not ex-ceed 50% of the value of its total assets. A loan made to an entity which meets these requirements tobe a small business at the time of the filing of the loan application, is deemed to be a small businessloan throughout the term of such loan.

Example A:A retail clothing business submits an application for a loan from a community bank on February 1,2016. The bank determines that during the 2015 tax year, the business had an average number of 30employees, and that for the same tax year the business’s gross receipts were $3,000,000 and its as-sets consisted entirely of inventory and working capital. The bank further determines that the businessis not part of an affiliated group. The loan is a “small business loan” for purposes of the subtractionmodification under Administrative Code section 11-652(8)(q).

Example B:The business in example A submits an application for a loan from the same community bank on Feb-ruary 1, 2017. The bank determines that during the 2016 tax year, the business had an average num-

Department ofFinance

TM ANSWERS TO THE MOST FREQUENTLYASKED QUESTIONS ABOUT

CORPORATE TAX REFORM

Corp Tax Reform FAQ Rev. 09.14.2015

ber of 40 employees, and that for the same tax year the business’s gross receipts were $4,000,000.The bank further determines that for the 2016 tax year the business was part of an affiliated group; andthat during that tax year the members of the affiliated group together had an average number of 90 em-ployees, and that for the same tax year the members of the group’s total gross receipts were$9,000,000. The loan to the business is a “small business loan” for purposes of the subtraction modi-fication under Administrative Code section 11-652(8)(q).

Example C:A limited partnership submits an application for a loan from a community bank on February 1, 2017.The bank determines that during the 2016 tax year, the partnership had no employees and its grossreceipts were $2,000,000 for the year. The bank also determines that its assets consist of corporatestock that has a value equal to $40 million and land that has a value equal to $10 million. The part-nership holds the corporate stock for investment. The loan to the partnership does not qualify as a“small business loan” for purposes of the subtraction modification under Administrative Code section11-652(8)(q).

COMBINED REPORTING1. Will New York City consider a corporation instantly unitary with a taxpayer when acquired?

It is a facts and circumstances determination upon acquisition.

2. How is the commonly owned group election made?The election is made on the original return of the combined group that is timely filed (including valid ex-tensions of time for filing). There will be an indicator on the combined return for this election.

3. Can both fiscal year and calendar year filers be included in a combined report? If so, when isa fiscal-year corporation that is a member of a combined group included in a combined reportif its designated agent files as a calendar-year taxpayer? Generally, a corporation with a fiscal tax year may be included in a combined report with a calendar-year taxpayer. If a corporation does not have the same tax year as the taxpayer designated as theagent for the combined group, the corporation’s income and activities for its tax year that ends withinthe tax year of the designated agent are included in the combined report. However, any corporationwith a fiscal tax year that begins in 2014 and ends in 2015 cannot be included in a combined reportwith any other corporation that has a tax year beginning on or after January 1, 2015. Fiscal-year tax-payers must file a separate tax return from that of its designated agent for a tax year that began in 2014and ends in 2015, if the designated agent's tax year begins on or after January 1, 2015. A fiscal-yeartaxpayer may be included in a combined report with its designated agent starting with its first fiscal yearthat begins on or after January 1, 2015. See also, Finance Memorandum 15-2 (April 17, 2015)Example A:A BCT taxpayer has a fiscal tax year that ends on September 30. The taxpayer is a member of a com-bined group whose designated agent has a calendar tax year ending on December 31. The BCT tax-payer is still subject to tax under the BCT for its 2014-2015 fiscal tax year, and must separately file FormNYC-1 for its fiscal tax year that runs from October 1, 2014 through September 30, 2015. For its fiscaltax year that begins on October 1, 2015 and ends on September 30, 2016, the former BCT taxpayeris included in the designated agent's combined report filed under Subchapter 3-A for the tax year thatbegins on January 1, 2016 and ends on December 31, 2016. Example B:A GCT taxpayer with a fiscal tax year that ends on June 30 is a member of a combined group with acalendar tax year ending on December 31. The taxpayer must separately file Form NYC-3L for its fis-cal tax year that runs from July 1, 2014 to June 30, 2015, and may not be included in the designatedagent's combined report for the tax year that begins on January 1, 2015 to December 31, 2015. Thefiscal tax year that begins on July 1, 2015 and ends on June 30, 2016 is included in the designated

agent's combined report for the tax year that runs January 1, 2016 through December 31, 2016. Example C:The designated agent of a combined group has made a commonly owned group election under Ad-ministrative Code section 11-654.3(3) (seven year election) for its 2015 calendar tax year. It owns morethan 50% of an affiliated corporation that is a GCT fiscal-year taxpayer with a tax year that ends onMarch 31. The affiliated corporation must separately file Form NYC-3L for its fiscal tax year that runsfrom April 1, 2014 through March 31, 2015. For its fiscal tax year that begins on April 1, 2015 and endson March 31, 2016, the affiliated corporation is included in the designated agent's combined report forthe tax year that begins on January 1, 2016 and ends on December 31, 2016.

4. Are nontaxpayer members of a combined group subject to the fixed dollar minimum tax? No.

CORPORATE PARTNERS1. Does corporate tax reform change the method for determining partnership income of a corpo-

rate partner?In general, no. We are currently preparing Rules that will address the issue in detail and will conformclosely to the New York State regulations for corporate partners.

CREDIT CARRYFORWARDS1. How does corporate tax reform affect credit carryforwards from years prior to 2015?

The credit carryforward provisions were included in the new Subchapter 3-A. Any credit carried forwardfrom a year prior to corporate tax reform may continue to be carried forward and used against the taximposed under Subchapter 3-A in tax years 2015 and after, under the same rules that applied prior toreform.l Credits with carryforwards of unlimited duration can continue to be carried forward until usedl Credits with carryforwards of a limited duration can be carried forward and used until their expiration.Example:A taxpayer, who relocated in 2008, was allowed a $3,000 Lower Manhattan Relocation and Employ-ment Assistance tax credit in 2013 that has a 5-year carryforward duration. The taxpayer used $1000in 2013 and $500 in 2014. The unused credit carryforward of $1,500 may continue to be carried for-ward until 2018, or whenever it is completely used, whichever comes first. Further, the twelve year ben-efit period also carries over into Subchapter 3-A.

INTEREST ATTRIBUTION1. If a taxpayer makes the election to reduce its investment income and other exempt income by

40% in lieu of attributing interest expense to investment income and other exempt income, canthe Department override the election and require attribution?No. The Department is bound to follow the taxpayer’s election.

INVESTMENT CAPITAL1. Is the 20% ownership presumption regarding a unitary relationship for purposes of determin-

ing exempt investment income a rebuttable presumption?The 20% ownership presumption is rebuttable. If the Department chooses to rebut the presumption,the burden will fall on the Department to demonstrate that the less than 20% owned subsidiary is uni-tary with the taxpayer.

2. The definition of investment capital includes a debt obligation or other security if its income orgain cannot be apportioned to the state as business income as a result of U.S. constitutionalprinciples. Will the Department issue guidance outlining the items it cannot constitutionally ap-portion as business income?No. Under U.S. Supreme Court case law, a state cannot treat an item of income of a taxpayer subjectto tax in the state as apportionable business income if the state does not have constitutional nexus withthat item of income. The Department will not attempt to offer guidance beyond existing Supreme Courtcase law as to how this constitutional doctrine would apply under particular facts and circumstances.

APPLICABLE TAX RATE FOR QUALIFIED NEW YORK MANUFACTURING CORPORATIONS1. How does a qualified New York manufacturing corporation determine its tax rate?

The tax rate applicable to a qualified New York manufacturing corporation depends upon both theamount of its business income allocated to the City and the amount of its total business income priorto allocation. Administrative Code sections 11-654(1)(k)(1), (2) and (3) require separate alternativetax rate calculations using each amount. To determine its applicable tax rate, the corporation must,first, calculate its tax rate with reference to business income allocated to the City, second, calculate itstax rate with reference to business income prior to allocation, and, third, select the highest rate result-ing from these calculations. Each calculation is necessary even if the corporation’s allocated busi-ness income is less than $10 million. Accordingly, the tax rate based on total business income priorto allocation sets a minimum, not a maximum, tax rate. No tax rate reduction applies at all if the cor-poration’s income allocated to the City is $20 million or greater or its business income prior to alloca-tion is $40 million or greater. Example A:A qualified New York manufacturing corporation has $15 million of business income allocable to the Cityand $25 million of total business income. It must calculate alternative tax rates using each amount ofincome. The applicable tax rate is 6.638% because:1. Tax rate based on business income allocated to the City. 4.425% + (4.425% x ([$15 million - $10

million] / $10 million)) = 6.6375% (round to 6.638%),2. Tax rate based on total business income prior to allocation. 4.425% + (4.425% x ([$25 million -

$20 million] / $20 million)) = 5.53125% (round to 5.531%), and3. The higher rate is 6.638%.Example B:A qualified New York manufacturing corporation has $15 million of business income allocable to the Cityand $35 million of total business income. It must calculate alternative tax rates using each amount ofincome. The applicable tax rate is 7.744% because:1. Tax rate based on business income allocated to the City. 4.425% + (4.425% x ([$15 million - $10

million] / $10 million)) = 6.6375% (round to 6.638%),2. Tax rate based on total business income prior to allocation. 4.425% + (4.425% x ([$35 million -

$20 million] / $20 million)) = 7.74375% (round to 7.744%), and3. The higher rate is 7.744%.

Example C:A qualified New York manufacturing corporation has $15 million of business income allocable to the Cityand $41 million of total business income. The applicable tax rate is 8.85% because total business in-come is $40 million or greater.Example D:A qualified New York manufacturing corporation has $25 million of business income allocable to the City

and $25 million of total business income. The applicable tax rate is 8.85% because business incomeallocated to the City is $20 million or greater.Example E:A qualified New York manufacturing corporation has $8 million of business income allocable to the Cityand $25 million of total business income. It must calculate alternative tax rates using each amount ofincome. The applicable tax rate is 5.531% because:1. Tax rate based on business income allocated to the City. Business income allocated to the City

is less than $10 million, which means the rate is 4.425%,2. Tax rate based on total business income prior to allocation. 4.425% + (4.425% x ([$25 million -

$20 million] / $20 million)) = 5.53125% (round to 5.531%), and3. The higher rate is 5.531%.Example F:A qualified New York manufacturing corporation has $8 million of business income allocable to the Cityand $15 million of total business income. It must calculate alternative tax rates using each amount ofincome. The applicable tax rate is 4.425% because:1. Tax rate based on business income allocated to the City. Business income allocated to the City

is less than $10 million, which means the rate is 4.425%,2. Tax rate based on total business income prior to allocation. Total business income prior to allo-

cation is less than $20 million, which means no increase to the 4.425% tax rate applies, and3. The tax rate is 4.425%.

MANDATORY FIRST INSTALLMENT (MFI)1. How does a bank that files under the Banking Corporation Tax for its 2014 tax year compute its

MFI for the first quarter of 2015?Corporate tax reform did not change the MFI rules. MFI will continue to be based on rules in effect fora taxpayer’s 2014 tax return.

2. Does corporate tax reform change the MFI rules?No. The mandatory first installment is still based on the prior year’s tax. The remaining three esti-mated tax payments should reflect the anticipated liability for the current tax year. Therefore, whendetermining the amount of the 2nd, 3rd and 4th estimated tax payments for tax years that begin onor after January 1, 2015, the effect of the corporation tax reform rules should be taken into consider-ation.

However, as a general matter, the Department will not assert an underpayment of estimated tax for anypayment due on or prior to June 15, 2015, if the taxpayer makes the required declarations and pay-ments in full no later than the first due date after June 15, 2015 on which an installment of estimatedtax is required to be paid, together with all other such declarations and payments.

NET OPERATING LOSS (NOL)1. Can a taxpayer carry back a net operating loss to a tax year beginning before January 1, 2015?

NOLs can be carried back 3 years. However, an NOL generated in 2015 or later cannot be carriedback to a tax year commencing prior to January 1, 2015.

PRIOR NET OPERATING LOSS (PNOL) CONVERSION SUBTRACTION1. Are the PNOL conversion subtraction and the net operating loss deduction (NOLD) applied to

business income pre-apportionment or post-apportionment?For tax years beginning on or after January 1, 2015, both the PNOL conversion subtraction and theNOLD are applied against apportioned business income.

REPEAL OF THE BANKING CORPORATION TAX (BCT) FOR C-CORPORATIONS 1. When does a fiscal-year BCT filer become subject to tax under Subchapter 3-A?

The BCT will not apply to C-corporations for tax years beginning on or after January 1, 2015. There-fore, a former BCT taxpayer is subject to tax under Subchapter 3-A starting with its first fiscal tax yearthat begins on or after January 1, 2015.Example:An BCT taxpayer with a fiscal tax year beginning on October 1, 2014 will be subject to tax under theBCT until September 30, 2015. The taxpayer will then be subject to tax under Subchapter 3-A for itsfiscal tax year that begins on October 1, 2015.

REPORTS1. When will the 2015 Subchapter 3-A forms and instructions be made available?

The Department is currently in the process of drafting the 2015 Subchapter 3-A forms and instructions.We anticipate the 2015 Subchapter 3-A forms and instructions will be made available in accordancewith our normal release dates in December 2015 so that taxpayers may timely file their returns in 2016.

FINANCE MEMORANDUM

This memorandum explains transitional filing provisions for the 2014 and 2015 tax years for General CorporationTax and Banking Corporation Tax taxpayers affected by the corporate tax reform legislation that was signed into lawas part of the 2015-2016 New York State budget (Part D of Chapter 60 of the Laws of 2015).

Significant changes were made to the Administrative Code as a result of corporate tax reform that require transi-tional tax filing provisions for the affected corporations. This memorandum discusses the tax filing changes appli-cable to: l Banking Corporation Tax (“BCT”), l General Corporation Tax (“GCT”), l S corporations, andl Estimated tax payments,

For more information about corporate tax reform, see our Web site at: http://www1.nyc.gov/site/finance/taxes/corporate-tax-reform.page

2015 transitional filing provisions for Banking Corporation Tax filers

Effective for tax years beginning on or after January 1, 2015, the BCT only applies if a corporation is an S cor-poration or a qualified subchapter S subsidiary under the U.S. Internal Revenue Code. Corporations that were pre-viously subject to tax under the Banking Corporation Tax are now subject to tax under Subchapter 3-A of Chapter6 of Title 11 of the Administrative Code (“Subchapter 3-A”). As a result, these corporations will no longer fileBCT returns, but will file Subchapter 3-A tax returns instead.

For tax years beginning before 2015, use the following provisions for filing 2014 BCT returns. For tax yearsbeginning after 2014, follow the information provided for GCT taxpayers under the heading 2015 transitional fil-ing provisions for GCT filers on Page 2.

l For any 12-month tax year that began before January 1, 2015, including fiscal tax years, complete a BCT taxreturn according to the Administrative Code in effect before January 1, 2015. Fiscal year taxpayers with a 12-month tax year that begins in 2014 but ends in 2015 are not permitted to file a short period return solely as aresult of corporate tax reform.

l For short tax years that began in 2014, use the 2014 BCT tax form regardless of when the tax year ends.

Finance

TM NYC DEPARTMENT OF FINANCE

15-2 April 17, 2015

Transitional Filing Provisions for TaxpayersAffected By Corporate Tax Reform Legislation

l Any amount of overpayment of BCT claimed on a taxpayer’s last return filed under the BCT will be treated asan overpayment of tax under Subchapter 3-A.

l A taxpayer that is an S corporation, or a qualified subchapter S subsidiary, under the U.S. Internal RevenueCode will continue to file a BCT tax return in tax years beginning on or after January 1, 2015 if it is a corpo-ration that is taxable under the BCT.

2015 transitional filing provisions for GCT filers

For tax years beginning on or after January 1, 2015, all corporations subject to tax under Subchapter 3-A (includ-ing corporations previously taxable under the BCT) must file using the following forms, as applicable:

l Form NYC-2, Business Corporation Tax Return l Form NYC-2A, Business Corporation Combined Return

A corporation that is an S corporation, or a qualified subchapter S subsidiary, under the U.S. Internal RevenueCode, will continue to file a GCT tax return in tax years beginning on or after January 1, 2015 if it is a corpora-tion that is taxable under the GCT. The applicable forms have not changed.

Taxpayers must use a 2015 tax form for tax years beginning on or after January 1, 2015, and before January 1,2016. A tax return submitted on an incorrect form, or on a form for a prior year, generally will not be processed,and will not be considered timely filed. However, see below for short period returns.

Fiscal year taxpayers. Changes to the Administrative Code as a result of corporate tax reform do not affect a fis-cal tax year beginning before January 1, 2015. Fiscal year taxpayers with a 12-month tax year that begins in 2014but ends in 2015 are not permitted to file a short period return for 2014 solely as a result of corporate tax reform.

Filing combined reports when members have different tax years.When a member of a combined group has atax year that differs from that of its designated agent, the member’s tax year that ends within the designated agent’stax year is included in the combined report. However, any corporation with a fiscal tax year that begins in 2014and ends in 2015 may not be included in a designated agent’s 2015 calendar year combined report.

Taxpayers using a 52-53 week accounting period. If a taxpayer reports on the basis of a 52-53 week account-ing period, and that period starts within seven days from the first day of a calendar month, its tax year is deemedto begin on the first day of such calendar month. For these taxpayers, if the 52-53 week accounting period startswithin seven days from January 1, 2015, the tax year will be deemed to have begun on January 1, 2015. Therefore,the Administrative Code changes resulting from corporate tax reform will apply, and the return must be filed usingthe applicable 2015 form.

C corporation short period returns. If a C corporation taxpayer is filing a tax return for a short period that beginson or after January 1, 2015 (for a reason other than terminating a federal S election or completing a corporate dis-solution), and the 2015 tax form is not available on the department’s web site at the time the C corporation isrequired to file the return, the taxpayer should not file using the 2014 tax form. Instead, the C corporation mustfile a request for an extension of time to file for the short period, which is available to be filed electronically, andwait until the 2015 tax form becomes available. If a C corporation has filed a short period return for the 2015 taxyear prior to the date of this memorandum, the department will automatically treat such return as a request for anextension of time to file for the short period. In either case, the department will automatically provide subsequentthree month extensions of time to file for the short period if the 2015 tax form is unavailable prior to the expirationof the initial extension period or an additional extension period. Under these circumstances, penalties will not beasserted for late filings that result from changes in the applicable law.

Terminating a federal S election. If an S corporation is terminating its federal S election on a day other thanthe first day of the tax year, the tax year is divided into two tax periods (an S short year and a C short year). Thetaxpayer must file a Form NYC-3L or NYC-4S for the S Corporation short year and a Form NYC-2 or FormNYC-2A for the C corporation short year. The due date of the S corporation short year return is the same as theC corporation short year, even though they are treated as separate short tax years.

Corporate dissolutions. If a taxpayer wishes to dissolve prior to the close of a tax year that, for federal income taxpurposes, begins on or after January 1, 2015, and before December 31, 2015, and the 2015 form is not yet availableon the department’s Web site, it should not file a 2014 return. Instead, the taxpayer must make a payment of itsestimated final tax due. The payment should be estimated based on the taxpayer’s final estimated tax liability underthe 2015 corporate tax reform rules and submitted in conjunction with an affidavit signed by an officer of the tax-payer. The affidavit should describe, in detail, the calculation of the final tax due and include a statement affirmingto file a final return no later than 30 days after the 2015 form has been made available on the department’s Web site.The estimated final tax payment and signed affidavit should be sent to the following address:

NYC Department of Finance Collection Division Quality Management/Special Project, 59 Maiden Lane, 28th FloorNew York, NY 10038

Filing dates, estimated tax payments, and extensions of time to file

The filing dates, estimated tax calculations, and rules regarding requests for additional time to file for Subchapter3-A taxpayers are the same as amended as the filing dates, estimated tax calculations, and rules regarding requestsfor additional time that apply under the GCT. However, when determining the amounts of the second, third, andfourth estimated tax payments for tax year 2015, the effects of corporate tax reform and changes to the computa-tion should be taken into consideration. For information on these rules, see Administrative Code sections 11-652,11-653, 11-654, 11-654.1, 11-654.2, 11-654.3 and 11-655.

No additions to tax will apply to declarations or payments of estimated tax required to be filed or paid, under sections11-657 and 11-658 of Subchapter 3-A of the Administrative Code, on or prior to June 15, 2015, if the taxpayer filessuch declarations and makes such payments no later than the first date after June 15, 2015 on which an installment ofestimated tax is required to be paid, together with all other such declarations and payments.

Mandatory first installment of estimated tax for 2015. The mandatory first installment for a tax year beginningon or after January 1, 2015, is paid with the applicable 2014 tax return at the time it is filed or with the applicableextension form if the taxpayer requests an extension of time to file its return. The mandatory first installment mustbe based on the tax or properly estimated tax shown on its 2014 filing. Law changes that take effect for tax yearsbeginning on or after January 1, 2015, are not required to be taken into consideration for this payment. Anyamount a taxpayer paid as a mandatory first installment for the 2015 tax year prior to the enactment of Subchapter3-A will be treated as a mandatory first installment under Subchapter 3-A if the taxpayer is a C corporation.

(Administrative Code: Part D of Chapter 60 of the Laws of 2015; sections 11-605, 11-606, 11-607, 11-608, 11-644, 11-645, 11-646, 11-647, 11-648, 11-655, 11-656, 11-657, and 11-658; Business Corporation Law: sections104-A, 402 and 1004; Regulations: sections 3-02(a)(2), 3-05(a)(2), 3-06, 11-12, 11-81(b) and 11-89)

NOTE: This is an informational statement of existing department policies or of changes to the law, regulations, ordepartment policies. It is accurate on the date issued. Subsequent changes in the law or regulations, judicial deci-sions, Tax Appeals Tribunal decisions, or changes in department policies could affect the validity of the informa-tion presented in this statement.

NYC DEPARTMENT OF FINANCE

15-3 July 17, 2015

__________ 1 Corporations that are floor specialists as defined in IRC section 1236(d) that have stock that is subject to the timing rules for

identification set forth in section 1236(d)(1)(A) must clearly identify such stock as held for investment in the floor specialists’ records

before the close of the seventh business day after acquisition.

FINANCE MEMORANDUM

The 2015-2016 New York State budget, Part D of Chapter 60 of the Laws of 2015, significantly changed the

taxation of corporations in New York City (the “City”). With the exception of S corporations, all corporations,

including banks, are subject to a new corporate tax under Subchapter 3-A of Chapter 6 of Title 11 of the

Administrative Code of the City of New York. The change is effective January 1, 2015.

S corporations, and qualified subchapter S subsidiaries, under subchapter S of the Internal Revenue Code of

1986, as amended, continue to file returns and pay tax under the City’s General Corporation Tax and Banking

Corporation Tax.

Subchapter 3-A adopts a new paradigm for the taxation of investment income and investment capital that

conforms to the New York State Article 9-A Corporate Franchise Tax, as amended by Part A of Chapter 59 of the

Laws of 2014 and Part T of Chapter 59 of the Laws of 2015.

Under the new definition of investment capital in Administrative Code section 11 652.4(a) and Tax Law

section 208.5(a), investment capital means those investments in stocks of non-unitary corporations that satisfy a five-

part test, which requires that the investments in stock:

satisfy the definition of a capital asset under section 1221 of the Internal Revenue Code (IRC) at all times the

taxpayer owned such stock during the tax year,

are held by the taxpayer for investment for more than one year,

if disposed of, generate (or would generate) long-term capital gains or losses under the IRC,

for stocks acquired on or after January 1, 2015, have never been held for sale to customers in the regular

course of business after the close of the day on which the stock was acquired, and

before the close of the day on which the stock was acquired, must be clearly identified in the corporation’s

records as stock held for investment in the same manner as required under IRC section 1236(a)(1) for the stock

of a dealer in securities to be eligible for capital gain treatment (whether or not the corporation is a dealer in

securities subject to section 1236).1

In the case of a combined report, the investment capital requirements apply to investments in stock held by all

corporations included in the group, whether or not the corporations are taxpayers.

Investment Capital Identification

Requirements for the Corporate Tax of 2015

for the Corporate Tax of 2015

Page 2, Finance Memorandum - Investment Capital Identification Requirements for the Corporate Tax of 2015

The purpose of this memorandum is to describe the identification procedures required to satisfy the fifth part of the

investment capital test. This memorandum is consistent with New York State Department of Taxation and Finance

Technical Memorandum TSB-M-15(4)C, 5(l), and a taxpayer that satisfies the investment capital identification

requirements for Article 9-A taxpayers set forth in that memorandum also satisfies the investment capital identification

requirements for Subchapter 3-A taxpayers set forth below.

Identification by dealers

For corporations that are dealers subject to IRC section 1236, stock acquired before and after October 1, 2015,

must be clearly identified in the corporation’s records as stock held for investment under IRC section 1236(a)(1) in

order to satisfy the investment capital identification requirement. A separate New York identification is not allowed

because the presence or absence of the federal identification under IRC section 1236 is determinative. Identification of

the stock as held for investment for purposes of IRC section 475 is not sufficient.

Transition rule for non-dealers

For corporations that are not dealers subject to IRC section 1236, stock acquired before October 1, 2015, that

otherwise meets the requirements to be investment capital, must be clearly identified in the corporation’s records as

stock held for investment before October 1, 2015, in order to satisfy the investment capital identification requirement.

Identification procedures for non-dealers

The investment capital identification procedures for corporations that are not dealers subject to IRC section

1236 are as follows:

The stock must be recorded in an account maintained for investment capital purposes only. That account must

be separate from any account maintained for stock held for sale to customers. The account may be an account

maintained in the taxpayer’s books of account for recordkeeping purposes only or it may be a separate

depository account maintained by a clearing company as nominee for the corporation.

The investment capital account must disclose the name of the stock, the CUSIP number of the stock (or CINS

number for international securities), date of purchase, the number of shares purchased and the purchase price

of the stock. If the stock is sold, the investment capital account also must disclose the date of sale, the number

of shares sold and the sales price for that stock. The investment capital account must be set up in a manner that

readily identifies the length of time the stock was owned by the corporation.

Identification procedures for stock acquired pursuant to options

If the stock is purchased by a corporation pursuant to an option, the stock may be identified as investment

capital only if the corporation, before the close of the day on which the option was acquired, clearly identified the

option in its records as held for investment. For corporations that are not dealers for purposes of IRC section 1236, any

stock purchased on or after October 1, 2015, pursuant to an option acquired by the corporation prior to October 1,

2015, may not be identified as investment capital unless the corporation clearly identified the option in its records as

held for investment prior to October 1, 2015.

Corporate partnership rules

If the corporation is a partner in a partnership and the corporation is using the aggregate method to compute its

tax, the corporation’s proportional part of the stock owned by the partnership may qualify as investment capital if the

statutory requirements for investment capital are satisfied at the partnership level. In particular, the partnership must

follow the identification procedures specified in this memorandum for the stock to qualify as investment capital. Thus,

if the partnership is a dealer for purposes of IRC section 1236, stock acquired before and after October 1, 2015, must

Page 3, Finance Memorandum - Investment Capital Identification Requirements for the Corporate Tax of 2015

be clearly identified by the partnership as held for investment under section 1236(a)(1) in order to satisfy the

investment capital identification requirement. For partnerships that are not dealers subject to IRC section 1236, stock

acquired before October 1, 2015, that otherwise meets the requirements to be investment capital, satisfies the

investment capital identification requirement if the partnership makes the identification before October 1, 2015, in

accordance with the identification procedures described in this memorandum for corporations that are not dealers.

If, on or after October 1, 2015, a corporation becomes a partner in a partnership that is not a dealer for

purposes of IRC section 1236 and the partnership, prior to the date the corporation becomes a partner, had not

identified any stock as investment capital using the procedures described in this memorandum, only stock acquired by

the partnership on and after the date the corporation became a partner may potentially qualify as investment capital.

Identification on combined reports

Each corporation included in a combined report must follow the identification procedures described in this

memorandum for investments in stock owned by that corporation. Thus, each corporation included in the combined

report that is not a dealer subject to IRC section 1236 must maintain its own investment capital account and follow the

identification procedures described in this memorandum.

Effect of identification

If a stock is not clearly identified as investment capital in the manner required, that stock will not qualify as

investment capital as defined in Administrative Code Section 11 652.4(a). However, even if the stock is identified as

required, it will not qualify as investment capital unless all the other requirements of Administrative Code Section 11

652.4(a)(i)-(iv) are satisfied.

NOTE: This is an informational statement of existing department policies or of changes to the law, regulations, or

department policies. It is accurate on the date issued. Subsequent changes in the law or regulations, judicial decisions,

Tax Appeals Tribunal decisions, or changes in department policies could affect the validity of the information

presented in this statement.

DEPARTMENT OF FINANCEAUDIT DIVISION

F I N A N C E NEW YORK THE CITY OF NEW YORK DEPARTMENT OF FINANCE

PP-2008-03 2/29/08

STATEMENT OF AUDIT PROCEDURE

ACCESS TO SUPERVISORS AND EXIT CONFERENCE

I. BACKGROUND This Statement of Audit Procedure provides guidance to field auditors and their supervisors concerning the Exit Conference process. A. General We believe that our audit process is an important part of the tax compliance system. Our goal is to make the process as fair and transparent as possible to foster increased voluntary taxpayer compliance. For example, taxpayers know that filings will be reviewed for accuracy and that a field examination of the books and records may be required. Our goal is to work with taxpayers so that they understand what constitutes correct filing and can do so in the future. B. Access to Supervisors Palm Cards: We want to ensure that all taxpayers under audit know exactly who the auditors supervisor is and how to contact them. We now include a “palm card” in the initial contact letter for all new audits. This card contains the name, telephone number and email address of the auditor, supervisor and audit manager. We will also include the issues that the auditor will initially look at as well as providing an estimated time frame for when the audit will be complete. Right to ask questions: At any time during the desk or field audit process the taxpayer may ask for a clarification of the relevant law, policies, procedures or scope of the audit. At the taxpayer’s request, a phone conference or an informal meeting between the taxpayer, the auditor, and the auditor’s supervisor and/or manager can be arranged to address the taxpayer’s concerns. These conferences and meetings will be arranged in such a manner as not to disrupt the progress of the audit.

C. Field Examination Exit Conferences When the field examination is complete, if the taxpayer does not agree with the auditor’s proposed changes, we will offer an Exit Conference. This is an informal meeting between the taxpayer and the Audit Division to discuss outstanding issues. II. PROCEDURE Statute Extensions: We want to provide Exit Conferences to resolve outstanding issues. When the statute of limitations for Finance to impose assessments is approaching, (within 90 days prior to expiration), we will only grant an Exit Conference if the taxpayer first submits a properly executed “Consent to Extend the Statute of Limitation for Assessments”. Before the Exit Conference: Auditors will provide taxpayers with the following:

a Notice of Proposed Tax Adjustment a complete copy of the audit workpapers reasonable amount of time to review the papers

We encourage taxpayers to submit a written statement (can be email) clearly explaining why they disagree with all or part of the adjustments proposed in the audit workpapers. The areas covered at the Exit Conference are those where the taxpayer requires clarification or where the taxpayer disagrees with the proposed adjustment. Who will be at the Exit Conference? At the conference, you can expect to see the Unit Manager, the Group Chief, and the auditor. Depending on the complexity of the matter, the Director, Deputy or Assistant Commissioner of Audit or the counsel to the Audit Division may be invited to attend. Taxpayers should feel free to be represented by their legal counsel and/or an accountant. All representatives must either hold a valid power of attorney or be accompanied by the taxpayer. Next Steps: After the Conference, the parties will discuss the next step in bringing the case to closure. When the audit is complete, the case will be transferred to Audit’s Quality Management Support Group for review. After the review is completed, if Finance and the taxpayer have agreed, a Notice of Consent Determination will be sent to the taxpayer. For cases that are completed, but we do not reach an agreement with the taxpayer, we will send a Notice of Determination to the taxpayer.

§ Section 38-06: Request for Discontinuance. Codified Rules: Closed to Comments Title 19: Department of Finance›Chapter 38: Conciliation Bureau At any time before the conclusion of conciliation, the requestor may serve on the conciliation bureau a written request for discontinuance. Once a request for discontinuance has been served, the director of the conciliation bureau shall issue and serve a conciliation decision confirming discontinuance of conciliation.

§ Section 38-07: Effect of Conciliation Decision. Codified Rules: Closed to Comments Title 19: Department of Finance›Chapter 38: Conciliation Bureau The service of a conciliation decision discontinuing conciliation shall start the running of the 90 day period for filing a petition, or shall reinstate any previously filed petition as provided in §38-04(d) of these rules, with regard to all issues not resolved at conciliation. A conciliation decision shall be served on the requestor and a copy thereof shall be mailed to the tribunal.

§ Section 38-07: Effect of Conciliation Decision. Codified Rules: Closed to Comments Title 19: Department of Finance›Chapter 38: Conciliation Bureau The service of a conciliation decision discontinuing conciliation shall start the running of the 90 day period for filing a petition, or shall reinstate any previously filed petition as provided in §38-04(d) of these rules, with regard to all issues not resolved at conciliation. A conciliation decision shall be served on the requestor and a copy thereof shall be mailed to the tribunal.

§ Section 38-08: Miscellaneous Provisions. Codified Rules: Closed to Comments Title 19: Department of Finance›Chapter 38: Conciliation Bureau (a) Service. (1) Service of all requests and filing of other papers with the conciliation bureau shall be made either by delivery to its office during office hours, or by mail properly addressed to such office. Where service or filing is made by mail, the date of service or filing is the date specified in Chapter 17 of Title 19 of the Rules of the City of New York. Where service or filing is made by courier, delivery, messenger or similar services, the date of service or filing is the date of receipt .Subject to paragraph (2) of this subdivision, service on parties can be madein the same manner and the same rules regarding date of service or filing shall apply. (2) Service of conciliation decisions shall be made by hand delivery or by registered or certified mail. (3) When the last day prescribed by any section of these rules for service of a request or filing of other papers with the conciliation bureau or performing any other act falls on a Saturday, Sunday or legal holiday in the State of New York, such service, filing or act shall be considered timely if it is performed on the next succeeding day that is not a Saturday, Sunday or legal holiday. (b) Extension of time. The conciliation bureau may for good cause, on its own or at the request of any party, grant a continuance, adjournment, or extension of time, other than the extension of time for filing the request for conciliation, provided no statutory prohibition exists. Notice of any such action shall be given to all parties.

10/29/15, 3:59 PMNYC.gov - Tax Appeals Tribunal

Page 1 of 1http://www.nyc.gov/html/tat/html/about/about.shtml

NYC Resources 311 Office of the Mayor

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The New York City Tax Appeals Tribunal (the "Tribunal") is anindependent agency created by the New York City Charter. TheTribunal is a fair, impartial, efficient and knowledgeable forum inwhich disputes between taxpayers and the New York CityDepartment of Finance ("DOF") involving taxes administered bythe City of New York other than the New York City Real PropertyTax are resolved.

The Tribunal consists of two divisions: an Administrative LawJudge Division and an Appeals Division. The Appeals Divisionconsists of three Commissioners appointed by the Mayor whoreview Administrative Law Judge Determinations upon the filing ofexceptions by a taxpayer and/or the Commissioner of Finance. One of the three Commissioners of the Appeals Division isdesignated as President of the Tribunal by the Mayor and servesas such during his or her term. The Administrative Law JudgeDivision consists of a Chief Administrative Law Judge and otherAdministrative Law Judges who conduct formal hearings andrender Determinations. The Administrative Law Judges also serveas Presiding Officers for small claims hearings in the Small ClaimsUnit of the Administrative Law Judge Division. Administrative LawJudges are appointed by the President of the Tribunal.

The Tribunal's Rules of Practice and Procedure include provisionsfor the filing of petitions, hearing practices and procedures beforethe Administrative Law Judges and Presiding Officers and appealsprocedures regarding exceptions to the Appeals Division fromDeterminations of the Administrative Law Judges.

NYC Dept. of FinanceFor policies andpronouncements on NYCtaxes, and information onParking violations and theSTAR Program.

NYC Tax Commission

For information on NYCproperty tax protests.

NYC.govThe City's official Web site.

New York State Dept.of Taxation & FinanceFor information on NewYork State and Citypersonal income tax andsales tax and other NewYork State taxes.

New York StateAppeals TribunalFor information on theNew York State TaxAppeals Tribunal

Internal RevenueServiceFor information on federaltax matters.

Copyright 2015 The City of New York Contact Us Privacy Policy Terms of Use

REQUEST FOR CONCILIATION CONFERENCECOMPLETE ALL APPLICABLE SECTIONS

Mail completed request form in duplicate to:NYC Department of Finance, Bureau of Conciliation, 345 Adams Street, 3rd Floor, Brooklyn, NY 11201

Name of Taxpayer: Employer Identification Number

Name of Contact Person: (corporations or partnerships)

Address: (number and street) Social Security Number

City and State: Zip Code

Business Telephone Number: Email Address: (We will contact you by email to schedule a conference and to request additional information, if needed)

Enter the tax type involved: _______________________________________ t Enter the case number t

Enter the taxable year(s) or period(s): _______________________________

n REDETERMINATION OF DEFICIENCY IS REQUESTED. n REFUND IS REQUESTED. A COPY OF THE NOTICE OF DETERMINATION A COPY OF THE NOTICE OF DISALLOWANCE BEING PROTESTED MUST BE SUBMITTED BEING PROTESTED MUST BE SUBMITTED WITH THIS REQUEST WITH THIS REQUEST

Date of Notice of Determination: Date of Notice of Disallowance.................

Principal due: $ ______________________

Interest due: $ ______________________

Penalty due: $ ______________________

Total amount on Notice $ ______________________ Amount of refund requested.................... $ ______________________

State the basis for making this claim. Include all relevant facts. (Attach additional sheets if more space is required.)

A DULY EXECUTED POWER OF ATTORNEY MUST ACCOMPANY THIS REQUEST if the taxpayer is being represented by, or this requestis signed by, someone other than: (i) a duly authorized officer of a corporate taxpayer; (ii) a general partner of a taxpayer that is a partnership; (iii) anadult spouse, registered domestic partner, parent, guardian or the person who prepared the return in the case of a taxpayer who is a minor or who isphysically or mentally incapable of representing him or herself.

- -- -No Notice of Disallowance has been receivedbut a claim for refund was filed on...........................(This request may be filed in a GCT or UBT case if at least six months have passed since theclaim was filed and no notice of disallowance hasbeen received.) Please include a copy of the claim.

- -

This request is made with the knowledge that a willfully false representation is a misdemeanor under Section 11-4004 of the NYC Administrative Code.

Signature of Taxpayer or Representative

Name Title Date

SIGNHERE:

PRINTORTYPE:

Print or type

Name of Taxpayer's Representative, if any:

Relationship to Taxpayer:

Address: (number and street)

City and State: Zip Code

Business Telephone Number: Email Address: (We will contact you by email to schedule a conference and to request additional information, if needed)

IF YOU HAVE FILED A PETITION, DO NOT FILE THIS REQUEST FORM. (See reverse side.)

Finance

TM

Request for Conc. Conf. 2014

NEW YORK CITY DEPARTMENT OF FINANCE

If you disagree with an action taken by the Department ofFinance (the issuance of a Notice of Determination pro-posing a tax deficiency or a Notice of Disallowance deny-ing a refund claim), you may contest this action by filingEITHER a Request for a Conciliation Conference with theDepartment of Finance OR a Petition for Hearing with theTax Appeals Tribunal. FAILURE TO TIMELY FILEYOUR REQUEST OR PETITION WILL RESULT INTHE STATUTORY NOTICE BECOMING FINAL AND,WHERE APPLICABLE, SUBJECT TO COLLECTION.

CONCILIATION CONFERENCEA Conciliation Conference is a rapid and inexpensive wayto resolve protests without a formal hearing. The confer-ence is conducted informally by a conciliation confereewho will review all of the evidence presented to determinea fair result. After the conference, the conferee will issuea proposed resolution of the case. If you do not agree withthe proposed resolution, the conciliation proceeding willbe discontinued and you will have 90 days to file a Petitionfor Hearing with the Tax Appeals Tribunal. The operationof the Conciliation Bureau is governed by Title 19, Ch. 38of the Rules of the City of New York.If you wish to request a Conciliation Conference, completethis form in duplicate, including all supporting documen-tation, and return it to the address indicated on the reverseside of this form within the time period stated on the statu-tory notice issued to you by the Department of Finance. IFYOU HAVE ALREADY FILED A PETITION FORHEARING WITH THE NEW YORK CITY TAX AP-PEALS TRIBUNAL, DO NOT FILE THIS REQUESTFORM.

TAX APPEALS TRIBUNAL HEARINGAdministrative Law Judge HearingA hearing is an adversarial proceeding conducted by an im-partial Administrative Law Judge of the Tax Appeals Tri-bunal. After the hearing, the Administrative Law Judge willissue a written determination which will finally decide thematter(s) in dispute unless either you or the Commissionerof Finance timely requests that the Commissioners of theTax Appeals Tribunal review the Administrative LawJudge’s determination. If such a review is requested, therecord of hearing and any additional oral and/or written ar-guments will be reviewed and considered by the Commis-sioners of the Tribunal who will issue a decision affirming,reversing, or modifying the Administrative Law Judge’s de-termination or referring the matter back for further hearing.

Small Claims HearingYou may elect to have your hearing held in the SmallClaims Unit of the Tax Appeals Tribunal if the amount indispute is $10,000 or less, exclusive of penalties and in-terest. A small claims hearing is conducted informally byan impartial Presiding Officer of the Tribunal who willissue a conclusive determination which is not subject to re-view by the Tribunal Commissioners or by any court. If you want a hearing before the Tribunal you must, withinthe applicable time period, BOTH: (1) file a written Peti-tion for Hearing with the:

New York City Tax Appeals Tribunal Administrative Law Judge Division 1 Centre Street, Suite 2430 New York, NY 10007

AND (2) serve a copy of the Petition for Hearing on theCommissioner of Finance (as provided on the Petition forHearing). A Petition for Hearing form (TAXAPPET) andthe Tribunal’s Rules of Practice and Procedure can bedownloaded from the following website:

http://nyc.gov/html/tat/html/home/home.shtmlor can be requested by writing to the New York City TaxAppeals Tribunal or by calling 212-669-4501.

POWER OF ATTORNEYA duly executed Power of Attorney must accompany thefiling of a Request for a Conciliation Conference or a Pe-tition for Hearing if the taxpayer is being represented byand/or the filing is signed by someone other than: (1) aduly authorized officer of a corporate taxpayer, (2) a gen-eral partner of a taxpayer that is a partnership, or (3) anadult spouse, registered domestic partner, parent, guardianor the person who prepared the return in the case of a tax-payer who is a minor or who is physically or mentally in-capable of representing himself or herself. A Power ofAttorney form (POA-1) can be downloaded from the fol-lowing website:http://www.nyc.gov/html/dof/downloads/pdf/poa/poa1.pdf

NOTICE OF TAXPAYER RIGHTSNotification of Your Right to Protest an Action Taken by the New York City Department of Finance

FOR OFFICE USE ONLY

P E T I T I O N

NEW YORK CITY TAX APPEALS TRIBUNALADMINISTRATIVE LAW JUDGE DIVISION

--------------------------------------------------------------XIn the Matter of the Petition of :

:::::

__________________________________:(NAME OF TAXPAYER / PETITIONER)

--------------------------------------------------------X

EMPLOYER IDENTIFICATION NUMBER OR SOCIAL SECURITY NUMBER ▼

_____________________________________________

DEPARTMENT OF FINANCE AUDIT/CASE NUMBER ▼

_____________________________________________

TYPE OF TAX / CHARGE: ____________________________________

TAX PERIOD(S) / DATE(S) OF TRANSACTION(S): _______________________________________

Petitioner’s address: ______________________________________________________________________________

______________________________________________________________________________

Telephone number: ( ______ ) _________________________ Fax number: ( ______ ) ________________________

Representative’s name: ____________________________________________________________________________A duly executed Power of Attorney authorizing the representative's appearance in this matter before the Tax Appeals Tribunal must be attached.

Representative’s firm and address: __________________________________________________________________

_________________________________________________________________________________________

Telephone number: ( ______ ) _________________________ Fax number: ( ______ ) ________________________

Representative’s capacity: ❐ Attorney ❐ C.P.A. ❐ P.A. ❐ Enrolled Agent ❐ Corporate Employee ❐ Other: _____________________

1. PETITIONER HEREBY REQUESTS THE FOLLOWING RELIEF:

❑ Redetermination of a deficiency A legible copy of the Notice ofDate of Notice of Determination ............................... _______/_______/_______ Determination must be attached.

Principal tax due per Notice ........................................ $______________________Interest due per Notice ................................................... $______________________Penalty due per Notice ................................................... $______________________Total due per Notice ......................................................... $______________________

OR

❑ Allowance of refund/creditDate of Notice of Disallowance ................................ _______/_______/_______ ORDate of Claim for Refund .............................................. _______/_______/_______Refund requested ............................................................. $ _____________________

OR

❑ Other relief (identify) : __________________________________ A legible copy of the Notice must

Date of protested Notice ............................ _______/_______/_______ be attached.

Has a jeopardy assessment been issued?

❐ YES ❐ NO

A legible copy of the Notice of Disallowanceor, if none has been issued within 6 monthsof the filing of a GCT, UBT or BCT refundclaim, the claim for refund must be attached.

The City of New York

2. SMALL CLAIMS ELECTION:The informal small-claims procedure resolves the controversy through a Determination issued by a Presiding Officer of theTribunal which is binding on both parties and is not subject to review at the Appeals Division of the Tribunal or in the courts.

If the matter at issue is not more than $10,000, exclusive of interest and penalty, does Petitioner request that the proceeding be conducted in the small claims unit? ............................................... ❑ YES ❑ NO

3. CONCILIATION CONFERENCE:Please note that you may not simultaneously request a conciliation conference and a hearing before the Tribunal. If a conciliation con-ference was requested but a conciliation decision has not yet been issued, you may not request a hearing before the Tribunal until afterthe conciliation decision has been issued.

❑ A conciliation conference in the Department of Finance’s Bureau of Conciliation was not requested.

❑ A conciliation conference in the Department of Finance’s Bureau of Conciliation was requested and a conciliation decisionwas issued on ______/______/______.

Legible copies of the conciliation decision and the protested Notice of Determination or Notice of Disallowance must be attached.

4. PETITIONER ALLEGES THAT THE COMMISSIONER OF FINANCE MADE THE FOLLOWING ERROR(S) OF FACTOR LAW AND STATES THAT THE FACTS AND LAW UPON WHICH PETITIONER RELIES ARE AS FOLLOWS:

This section must be filled out. Use separately numbered paragraphs. Attach a separate sheet, if necessary.

WHEREFORE, Petitioner respectfully requests that this petition be granted. The undersigned certifies that thestatements herein are made with the knowledge that a willfully false representation is a misdemeanor punish-able under section 210.45 of the Penal Law of the State of New York.

____________________________________ ___________________________________ _____________Signature of Petitioner / Representative ▲ Title (if applicable) ▲ Date ▲

If signed by a person other than the Petitioner, indicate capacity:

❑ General Partner ❑ Officer ❑ Representative ❑ Other: ___________________________________________

WITHIN THE TIME LIMITATIONS PRESCRIBED BY APPLICABLE STATUTE, YOU MUST BOTH:

FILE THIS PETITION AND 2 CONFORMED COPIES WITH:Chief Administrative Law JudgeNYC Tax Appeals TribunalAdministrative Law Judge DivisionThe Municipal BuildingOne Centre Street, Suite 2450New York, NY 10007

AND SERVE 1 CONFORMED COPY OF THE PETITION ON:Corporation Counsel of the City of New YorkTax & Bankruptcy Division100 Church Street, 4th FloorNew York, NY 10007

The Corporation Counsel was served by: ❑ Mail ❑ Hand Delivery ❑ Other: ___________________________

If filing and/or service is by mail, it should be made by certified or registered mail, return receipt requested. An affidavit or other proofof service should be enclosed with the Petition. Please call (212) 669-4501 if you have any questions regarding this form.

DETAILS OF REQUEST FOR REDETERMINATION OF DEFICIENCY

Print or type. Complete all applicable sections.

REASON YOU ARE DISPUTING THE NOTICE

REQUEST FOR CONCILIATION CONFERENCE - CMVT- FOR USE BY NEW YORK CITY COMMERCIAL MOTOR VEHICLE TAXPAYERS ONLY -

NEW YORK CITY � DEPARTMENT OF FINANCE

Date of Notice of Determination: ___________/___________/___________

Tax type involved: COMMERCIAL MOTOR VEHICLE TAX

Enter the taxable year(s): ___________/___________/___________

Principal due: $ ____________________________

Interest due: $ ____________________________

Penalty due: $ ____________________________

TOTALAMOUNT ON NOTICE: $ ____________________________

� A. Vehicle license plates were surrendered, sold or destroyedprior to the tax year.

� B. Vehicle and/or plates was/were stolen prior to the tax year.

� C. Vehicle is registered within New York City but used primarilyoutside New York City and not in connection with a businesscarried on in New York City.

� D. Payment was made previously.

This request is made with the knowledge that a willfully false representation is a misdemeanor punishable under Section 11-4004 of the NYC Administrative Code.

____________________________________________________________________ ______________/______________/_____________Signature of Taxpayer or Representative Date

C h e c k ( �� ) t h e a p p r o p r i a t e b o x : A t t a c h t h i s : P l e a s e N o t e :

A copy of the New York State Department of Motor Vehi-cles’ FS-6T receipt showing date plates were turned in.

A dated copy of the police report issued when the vehi-cle and/or plates was/were reported stolen as well as acopy of New York State Department of Motor Vehicles’FS-6T receipt.

Documentation (e.g. mileage logs) proving that the vehicle isnot used principally in New York City and it is not used in con-nection with a business carried on within New York City.

Proof of payment: copies of the front and back of can-celed check(s) or money order(s) or other receipt issuedby the Department of Finance.

The burden of

proof is on the

taxpayer to show

that a vehicle with

commercial plates

registered in New

York City is not li-

able for the tax.

see reverseside for mailinginstructions �

A DULY EXECUTED POWER OF ATTORNEY MUST ACCOMPANY THIS REQUEST if the taxpayer is being represented by, or this request is signed by,someone other than: (i) a duly authorized officer of a corporate taxpayer; (ii) a general partner of a taxpayer that is a partnership; (iii) an adult spouse, parent, guardianor the person who prepared the return in the case of a taxpayer who is a minor or who is physically or mentally incapable of representing him or herself.

SOCIAL SECURITY NUMBER

EMPLOYER IDENTIFICATION NUMBER

Name of Taxpayer's Representative, if any:

_________________________________________________________________________________________________________Relationship to Taxpayer:

_________________________________________________________________________________________________________Address (number and street):

_________________________________________________________________________________________________________City and State: Zip Code:

_________________________________________________________________________________________________________Business Telephone Number:

SOCIAL SECURITY NUMBER

EMPLOYER IDENTIFICATION NUMBER

� LICENSE PLATE NUMBER �

Finance

TM

Name of Taxpayer:

_________________________________________________________________________________________________________Name of Contact Person (corporations or partnerships):

_________________________________________________________________________________________________________Address (number and street):

_________________________________________________________________________________________________________City and State: Zip Code:

_________________________________________________________________________________________________________Business Telephone Number:

ConcConf-CMVT Rev. 04.02.09

If you disagree with an action taken by the Department of Fi-nance (the issuance of a notice of determination, the denialof a refund claim), you may contest the action by filing a Pe-tition for a Tax Appeals Tribunal hearing or a Request forConciliation.

The Petition or Request must be filed within the time periodstated in the Notice that the Department mailed to you. Thestart of the time period is the date on the Notice. Failure totimely file your Request or Petition will result in the Noticebecoming final and subject to collection.

You may respond on your own behalf or you may have anauthorized representative present your case for review. Anauthorized representative must submit a Power of Attorneyfrom you to represent you.

CONCILIATION

Conciliation is an inexpensive way to resolve protests with-out a formal hearing. If you are requesting conciliation ona Commercial Motor Vehicle Tax matter and your protest in-volves payment discrepancies or is based on facts relatingto the registration of the vehicle (e.g., the plates were sur-rendered, the vehicle stolen, etc.), the request and any ac-companying documentation is initially forwarded to theCommercial Motor Vehicle Tax Unit of the Department of Fi-nance for review. In most instances, the case can be re-solved by that Unit without your having to appear for aconference. If you are protesting a Commercial Motor Ve-hicle Tax matter on any other basis, the Conciliation Bureauof the Department of Finance will review the factual infor-mation submitted. If the Bureau determines that a confer-ence is necessary, you will be notified in writing of the dateof that conference. Where practical, the conference maybe conducted by telephone conference call. All cases willbe closed by means of the issuance of a proposed resolu-tion by the Department of Finance and a conciliation deci-sion. You may disagree with the proposed resolution, inwhich event, you may file a Petition for a Tax Appeals Tri-bunal hearing within 90 days after the date of the concilia-tion decision. If you disagree with the proposed resolutionbut do not file a petition within 90 days, the original noticeof determination will become final and subject to collection.

To request Conciliation, complete the front of this formand return it together with any information necessary,to the address indicated below.

TAX APPEALS HEARING

Administrative Law Judge Hearing

The procedure for a Tax Appeals Hearing is begun by filinga Petition. The petition must be in writing and must specif-ically indicate what actions of the Department are beingcontested.

The hearing is an adversary proceeding before an impartialadministrative law judge. The hearing will be recorded. Afterthe hearing, the administrative law judge will issue a deter-mination which will decide the matter(s) in dispute unless ei-ther you or the Department requests review by theCommissioners of the Tax Appeals Tribunal. If such a re-view is requested, the record of hearing and any additionaloral or written arguments will be reviewed and the Tribunalwill issue a decision affirming, reversing or modifying the ad-ministrative law judge's determination, or referring the mat-ter back to the administrative law judge for further hearing.

Small Claims Option

You may elect to have your hearing held in the Small ClaimsUnit if the amount in dispute is $10,000 or less, exclusive ofpenalties and interest. The hearing is conducted informallyby an impartial presiding officer. The presiding officer's de-termination is conclusive and is not subject to review by anyother unit in the Tax Appeals Tribunal or by any court.

You may request a petition form and/or the Rules of Practiceand Procedure of the Tax Appeals Tribunal by writing to:

New York City Tax Appeals TribunalAdministrative Law Judge Division1 Centre Street, Suite 2450New York, NY 10007

A request for rules is not considered the filing of a Pe-tition for purposes of the time limits, and does not ex-tend the time limits for filing a Petition.

NOTICE OF TAXPAYER RIGHTSNOTIFICATION OF YOUR RIGHT TO PROTEST AN ACTION TAKEN BY THE NEW YORK CITY DEPARTMENT OF FINANCE

Mail this completed form along with a photocopy of the Notice you received and any additional required information to:

NYC DEPARTMENT OF FINANCE, COMMERCIAL MOTOR VEHICLE TAX66 JOHN STREET, 2ND FLOOR, NEW YORK, NY 10038-3735

MAILING INSTRUCTIONS

Request for Conciliation Conference - CMVT Page 2

ConciliationConference

How soon after I receive the notice must I file my request?The chart below lists how long you have to request a conciliation. The amount of time is based on the tax type.

Can I protest other notices issued by Finance?No. Conciliations can only grant a conference for a Notice of Determination or a Notice of Disallowance.

Once I have filed the request, when will the conference be scheduled?Your case will probably be scheduled within 45 to 60 days from the time we receive your request. If you want the conference to be sooner, we will try to accommodate you. Our rules require that we give at least 30 days notice before the initial conference.

What if I can’t attend the conference on the date scheduled?If you are unable to attend the conference on the date scheduled, you can request, in writing, an adjournment. We must receive your request at least five (5) days before your scheduled conference.

What is the conference setting like?It is an informal setting where you and an attorney representing Finance, each present their side to a conciliator. Conciliators are impartial and will analyze the case and try to resolve the matter.

Do I need an attorney or a CPA?No. You may appear on your own if you want. This is your choice. Some taxpayers choose to have an attorney or an accountant attend the conference. In major cases, some taxpayers choose to have both. If you choose to have representation, please remember we’ll need a power of attorney form before the conference date.

TYPE OF TAX TO FILE NOTICE WHEN TO FILE NOTICE WHEN

General CorporationUnincorporatedBusiness Bank Tax

Real Property TransferHotel Room OccupancyCommercial RentUtilityCommercial MotorVehicle

90 days from thedate on the notice

2 years from thedate on the notice

Determination Disallowance

90 days from thedate on the notice

90 days from thedate on the notice

Determination Disallowance

Frequently Asked Questions

I received a Notice of Determination or Notice of Disallowance about my City taxes from the Department of Finance. What can I do?If you agree with the Notice of Determination you can pay the tax. If we sent you a Notice of Disallowance, you may choose not to pursue the refund that you had applied for.

If you disagree with our decision, you may file either a Petition with the Tax Appeals Tribunal or a Request for Conciliation Conference with the Conciliation Bureau.

Which taxes does Conciliations deal with?We offer conciliation conferences for taxes Finance administers, other than Real Property Taxes. This means all City Business Income and Excise Taxes. The most common taxes are the NYC General Corporation Tax, the NYC Unincorporated Business Tax, the NYC Utility Tax and the City’s Real Property Transfer Tax. We will work with you or your representative to resolve your tax matters.

When may I use the process?Conciliation conferences can be requested when: 1 Finance assessed additional tax liability. Taxpayers may use our Conciliations process when they disagree with a Notice of Determination asserting an additional tax liability issued by Finance’s Audit Division.

2 Finance denied your claim for a refund. Conciliation is also available when Audit denies your City business income or excise tax refund request. When we deny your refund claim you will get a Notice of Disallowance.

How do I request a Conciliation Conference?File a Request for Conciliation Conference form. Please include the notice you are protesting. Please remember that you must file for a Conciliation Conference in the time set by law.

How Can Finance’s Conciliation Bureau Help You Receive A Fair Resolution Of Your City Business Income Or Excise Tax Matter?• The Department of Finance Conciliation Bureau is part of the agency’s Legal Affairs and offers an independent, informal forum to resolve tax disputes.

• We will meet with you, or you and your representative, in a conciliation conference to resolve your tax matters in a non-judicial setting.

What should I bring to the conference?Please bring all documentation related to your claim, including your power of attorney if there is a representative. For example, if you sell your home and Finance calculated your tax based on the wrong sales price, you should show us the right price. We may also ask for other appropriate documentation. The more documentation to support your case, the quicker and more accurate the resolution will be.

What are the outcomes of the conference?If you owed additional tax, the amount may be reduced, upheld, or abated. If you filed for a refund, you may receive the entire amount, part of the refund, or the refund may be denied.

What if I agree with the outcome?The conciliator will give you a document called a Proposed Resolution. You must sign the resolution. This shows that you agree with the outcome. The resolution can then be made final.

What if we can’t reach an agreement at the conference? What are my options?If an agreement isn’t reached, the conciliator will still issue a Proposed Resolution. You must sign this to indicate you don’t agree with the outcome. After we receive the signed document, we will issue our Conciliation Decision. After you receive our decision, you have 90 days to file with the Tax Appeals Tribunal.

CUSTOMER ASSISTANCE

BY PHONE:For more information call 212-504-4080 or call 311.

Outside New York call 212-NEW-YORK or 212-639-9675.TTY/TTD access for hearing-impaired: 212-504-4115.

EMAIL:To email inquiries visit the Finance website at nyc.gov/finance. Select Contact Finance from the left sidebar on the Home Page and choose:

Email/Other Services/Legal Inquiries.

ONLINE:For more information or to download forms discussedin this brochure

please visit Finance at nyc.gov/finance

RE

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9

TaxpayerServices

ZalKumar,Esq.Director

Overview•  TaxpayerServicesisanewunitthatwascreatedinordertorespondtotechnicalques?onsraisedbytaxprac??onersaboutbusinessandexcisetaxes,providedetailedexplana?onsofDepartmentofFinancepolicy,andworkonspecialini?a?vesthatareimportanttotaxpayersandtaxprac??oners.ThenameofthisunitmaybechangedtoavoidconfusionwiththeOfficeoftheTaxpayerAdvocate.YoumaycontacttheofficebycallingEllenMillerat718.488.2014.YoumayalsoreachusbyE-mailattaxpayerservices1@finance.nyc.gov.

CurrentTechnicalGuidance•  TheNewYorkCityDepartmentofFinancecurrentlyu?lizesthefollowingformatstoprovideguidance:

Regula'ons•  Aregula?onprovidesguidancefornewlegisla?onoraddressesissuesthatarisewithrespecttoexis?ngstatutes.Regula?ons

interpretandgivedirec?onsoncomplyingwiththelaw.Regula?onsarepublishedintheRulesoftheCityofNewYork,aXerpublicinputisfullyconsideredthroughwriYencommentsandapublichearing.

FinanceMemorandum•  FinanceMemorandaadvisetaxpayersandtaxprofessionalsoftheDepartment'scurrentposi?onand/orprocedureswithrespectto

specificissues.Memorandaaremerelyadvisoryandexplanatoryinnature,andnotdeclaratoryrulingsorrulesoftheDepartmentofFinanceanddonothavelegalforceoreffect,donotsetprecedent,andarenotbindingontaxpayers.

StatementsofAuditProcedure

•  StatementsofAuditProcedure(SAPs)areusedbyFinanceauditstaffforguidanceonvariousaudit-relatedmaYers.Whiletheyareintendedtoinstructauditorshowtoresolvespecificissues–andtheprimarypurposeisinternaldistribu?on–wegenerallymakeallSAPsavailableonourwebsiteandtheycanbeusefulforunderstandingtheauditprocessandtheanalysisofFinancewithrespecttoapar?cularissue.

FinanceLe9erRulings•  ALeYerRulingisawriYendocumentthatstatesFinance’sposi?ononhowalawisappliedtoaspecificsetoffactssubmiYedbythe

taxpayer.ArulingisbindingonFinanceonlywithrespecttothepersontowhomitisrendered,andonthecondi?onthattheactualfactsmatchthefactsstatedintherequest.Itistheonlyformofspecificallybindingadvice.

UpdatesonAuditIssues•  AnUpdateinformstaxpayersofissuesthatFinancehasiden?fiedforreview,andbrieflysummarizesFinance’sanalysisand

recommenda?ons.TheseareinformaldocumentsthatFinanceusesforinforma?onalpurposes,andmayprovideclaritywithregardtoanareaoflawthatFinancehasiden?fiedasareaofnon-complianceormisunderstanding.

NYC-DOF BUSINESS TAX E-SERVICES E-service enhancements and new developments for taxpayers and tax preparers

GenTax Taxpayer Access •  New e-services website offers

•  enhanced account management •  two-factor authentication •  additional requests

•  Existing customers will not need to create new usernames

•  New taxpayers and tax preparers will need to register

Account Management • Profile Updates

•  Two factor authentication

Filing and Viewing Returns • Short form returns are available to be filed online • All filed returns can be viewed

Making Payments • Pay Everything

•  for all debt owed by the taxpayer, •  for debt owed on a certain account •  For debt owed for a certain period

• Pay how you want •  ACH Payments •  Credit Card Payments •  ACH Credit/Fedwire payments

• Pay when you want •  Estimated Payments

Viewing Account Activity • View payments and returns that have posted to the

taxpayer’s account

Viewing letters and notices • Access a copy of all notices and letters sent to the

taxpayer

Credit Applications • Biotech, REAP and LMREAP applications are now

available for online filing

Online Requests • Respond with

documentation to request for information

• Respond to a delinquency

• Request a conciliation conference

• Request a tax clearance letter

• Request a payment plan

Non-Login Requests • Update a Taxpayer ID

• Register as a Taxpayer or Tax preparer

• Get the status of a refund request

TheOfficeoftheTaxpayerAdvocate

NYCDepartmentofFinanceTaxRAPP10/19/15

TheOfficeoftheTaxpayerAdvocate

•  PoliCcoNewYork:Sept.30,2014“CityhopingtocreateposiConoftaxpayeradvocate”

"ThegenesisofthisprojectbasicallyarosefromthefactthatwereceivedanumberofcomplaintsfromtaxpayerswhenIfirststarted,andinviewofthesecomplaintsrealizedmanyofthemwerelegiCmate,"JihasaidaYeranin-housestaffmeeCngontheiniCaCve."Isaidtomyself...there'saneedtoreallyhaveanindependentbody,anindependentadvocatewithintheagency”NYCBarCommi9eeonStateandLocalTaxa>on"TheCommi]eeapplaudsyourdecisiontocreatetheOfficeofTaxpayerAdvocatewithintheDepartmentofFinance("DOF").ThetaxombudsmanroleiswellestablishedattheFederaltaxlevel.TheInternalRevenueService("IRS")OfficeoftheTaxpayerAdvocate,whichwasestablishedin1979,playsanimportantroleinassisCnginresolvingspecificdisputeswiththeIRSandinworkingwiththeIRStoimproveprocessesonacost-effecCvebasis.""In2009,theNewYorkStateDepartmentofTaxaConandFinance("Department")createdtheOfficeoftheTaxpayerRightsAdvocate("OTRA").TheDepartment'sstatedgoalsforOTRAwereverymuchinlinewiththoseoftheIRS,thatis,toassistinresolvingdisputesandtoimprovetheDepartment'sprocesses.Forthemostpart,theDepartment'sOTRAhasbeenseenasasuccessbyboththetaxpayercommunityandDepartmentmanagementand,inmanyways,canserveasamodelforDOF."

TimeLine:Sept.2014CommissionerJihaannouncesheisthinkingofcreaCnganindependentTaxpayerAdvocateDec.2014NYCBarCommi]eeonStateandLocalTaxaConwritesale]ertoCommissionerJihadiscussingtheproposedposiCon

OrganizaConoftheOffice

•  TaxpayerAdvocate:DianaLeyden,Esq.(hiredJuly2015)

•  StaffhiredSept.28,2015A]orney-Advisor:PoojaKondabolu,Esq.CaseAdvocates:Property:RobinBermudezCollecCons:FranciscaOwheruoBusiness&Excise:PoojaKondabolu,Esq.TaxAnalyst(andInquiries)NicolaNurse

Howtocontactouroffice:•  3-1-1•  GeneralNumber:(212)312-1800•  EFax:(646)500-6907•  OfficeEmail:DOFTaxpayerAdvocate@finance.nyc.gov

•  LocaCon/Mailaddress:253Broadway,6thFloor,NY,NY10007

•  DianaLeyden’semail:LeydenD@finance.nyc.gov•  DianaLeyden’sphone#:(212)312-6575•  Websiteaddress:www.nyc.gov/taxpayeradvocate

CriteriaforqualifyingforhelpfromTheOfficeoftheTaxpayerAdvocate

•  1.Youhavemadeareasonablea]empttosolveyourinquiryorcomplaintwiththeDepartmentofFinance.YourinquiryorcomplainthasnotbeenfixedoryouhavenotreceivedaCmelyresponse.

•  2.YoubelieveyoucanshowthattheDepartmentofFinanceisapplyingthetaxlaws,regulaConsorpoliciesunfairlyorincorrectly,orhaveinjuredorwillinjureyourTaxpayerRights.

•  3.YoufaceathreatofimmediateharmfulacCon(e.g.,seizureofyourfundsorproperty)bytheDepartmentofFinanceforadebtyoubelieveyoucanshowisnotowed.

•  4.YoufaceathreatofimmediateharmfulacCon(e.g.,seizureofyourfundsorproperty)bytheDepartmentofFinanceforadebtyoubelieveyoucanshowisincorrect,unfair,orillegal.

•  5.Youbelieveyoucanshowthatyouwillsufferdamagethatisbeyondrepairoralong-termharmfulimpactifreliefisnotgranted

•  6.YoubelieveyoucanshowthatyourproblemalsoaffectsothersimilartaxpayersandisaproblemwiththeDepartmentofFinance’ssystemsorprocesses.

•  7.YoubelieveyoucanshowthattherarefactsinyourcasejusCfyhelpfromtheOfficeoftheTaxpayerAdvocate.

•  8.YoubelieveyoucanshowthatthereisacompellingpublicpolicyreasonwhyyoushouldgethelpfromtheOfficeoftheTaxpayerAdvocate

ExamplesofwhentocontactTheOfficeoftheTaxpayerAdvocatewith

COMPLAINTS•  TheDepartmentofFinancehasassessedalatepaymentorlatefilingpenalty,

youhavetriedtocontactthepersonlistedonale2erorwhosenamewasgiventoyouandnooneiscallingyouback.YouhaveinformaConthatcanprovetheformwasnotfiledlateorthatthepaymentwasnotpaidlate.

•  TheDepartmentofFinancehassentyourclientale]erinformingitthataUBTtaxreturnhasnotbeenfiled.YouhavecalledanumberattheDepartmentofFinanceandhavebeenswitchedtoseveralpeople.Noonecangiveyouananswer.Youhaveproofthatthereturnwasfiled,andinfactyouthinkarefundisdue.Yourclientwouldliketogetthemoney.

•  TheDepartmentofFinancemisclassifiedpropertyasthewrongclass.YourclientnoCfiedtheDepartmentofFinancepropertyunitbyale]erdated2013andforFY15/16theDepartmentofFinancecorrecteditgoingforward,butwouldnotcorrectitforFY13/14.YourclientwouldliketogetarefundforprioryearsandyoucanprovethefirstCmetheclientcontactedtheDepartmentofFinancewiththecorrectinformaCon.

DOFForm911

WhentocontactTheOfficeoftheTaxpayerAdvocatewithanINQUIRY•  Youdon'tknowwhoattheDepartmentofFinancetosendcorrespondencetoandhavetriedfindingtheaddressonthewebsiteorthetaxformsandinstrucCons.

•  Inquiriescanbemadeto:•  3-1-1•  Onlineinquiry•  emailthroughtheDepartmentofFinancewebsite

•  Calltoouroffice

WeareexpecCngGROWINGPAINS

•  Weareasmallofficeandjustgeqngstarted.•  Wewilltrytoanswereverycall,le]erandemail.•  BepaCentaswegetourofficeupandrunning.•  WewelcomesuggesConsonhowtodothingsbe]erandmoreefficiently.

•  Greatestvalueisforourofficetobeabletofindthesystemicproblems-theymaybeapparentfromthecasesweworkorthroughsubmissionsbytaxpayersANDPROFESSIONALS.

Wewillbeaskingforcustomerfeedback

Voluntary Disclosure and Compliance If you owe taxes to New York City, you may be eligible to join the Voluntary Disclosure and Compliance Program (VDCP). If you are accepted into VDCP, the Department of Finance will waive penalties and may not require that you file past due tax returns and make tax payments for some periods. You or your representative may contact us at any time to ask to participate in the VDCP. If you have already been contacted by the Department of Finance for the taxes due, you are not eligible for this program. You may face penalties, interest and possible criminal prosecution in addition to owing the tax amount due if you are discovered before coming forward. You or a representative may contact us to discuss eligibility for VDCP before filing returns to pay past due taxes. Once accepted into the VDCP, you will receive a written commitment to waive penalties and a list of the periods for which you are required to file. Taxpayers that owe taxes to both New York City and New York State may contact the State Department of Taxation and Finance to join in the Unified Program. Under this program, you submit your request to the State and receive one agreement that covers taxes owed to both the City and the State. Voluntary Disclosure and Compliance Program Brochure Download Brochure Statement of Audit Procedure Voluntary Disclosure #PP-2009-1rev. 5/24/12 Eligibility To be eligible for the VDCP you cannot: • Be currently under audit by the Department of Finance; or • Have had prior contact with the Department of Finance about the

specific liabilities involved; or • Be party to any criminal investigation being conducted by NYS or

any political subdivision of NYS; or • Be related to a tax avoidance transaction that is a Federal or NYS

reportable Transaction. Note: You may participate in the program even if your tax delinquency is due to fraud or was otherwise intentional. Application Process Please submit a written request, which may be anonymous, to:

NYC Department of Finance TPP Division - Voluntary Disclosure and Compliance Coordinator 345 Adams Street, 7th Floor Brooklyn, New York 11201

The request must include the following information: • A description of the business activities in New York City and New

York State; • When these activities began; • The number of employees involved in the business and their titles; • When the taxpayer believes taxes were first due; • The reason the taxes were not paid in the past; • The estimated business taxes on a year-by-year basis; • An affirmation that NYC has not contacted the taxpayer before

about these specific tax liabilities and that the taxpayer is not currently under audit by the Department of Finance for any City tax.

Before sending a formal written request, you may call 311 for more information. Please note that calling 311 is not a request to join the VDCP.

We will review the information you submit to verify eligibility and to determine the tax periods to be filed. If you are found eligible for the VDCP, we will issue you a Voluntary Disclosure and Compliance Agreement Letter, which usually gives you 30 days to file the requested returns.

DEPARTMENT OF FINANCE

AUDIT DIVISION

PP-2009-1rev. 5/24/12

STATEMENT OF AUDIT PROCEDURE I. BACKGROUND The New York City Department of Finance ("Finance") encourages all taxpayers to file City tax returns and to pay taxes owed on time. Pursuant to administrative code section 11-131, Finance now allows taxpayers who are delinquent to come forward voluntarily to comply with New York City tax laws. For City taxes administered by New York State (NYS), taxpayers must contact the NYS Department of Taxation & Finance (at www.tax.ny.gov) to participate in the Voluntary Disclosure program. Finance believes that encouraging delinquent taxpayers to come forward will increase tax compliance. We have established general procedures for auditors to follow to help taxpayers comply. Some taxpayers may qualify for a limited look-back period of six years (for trust fund taxes or intentional tax evasion) or three years (for most other circumstances). Some otherwise eligible taxpayers may not be offered a voluntary disclosure agreement when doing so will impede rather than further the goal of overall compliance. For example, a taxpayer that is late with the filing of a single return may not utilize the program to avoid the imposition of a single late filing penalty. II. SCOPE This Statement of Audit procedure (“SAP”) provides general guidance to Finance staff on how to handle requests to participate in the Voluntary Disclosure and Compliance Program (VDCP) so that all requests are given consistent treatment. Specifically, the SAP: • describes a voluntary disclosure; • explains who is eligible to make a voluntary disclosure; • explains how the initial contact is usually made; and • provides the steps necessary for the voluntary disclosure process; A taxpayer that merely wishes to file returns for all delinquent years and fully pay any resulting liability may do so at any time. These voluntary filings of delinquent returns are not covered in this SAP.

VOLUNTARY DISCLOSURE AND COMPLIANCE PROGRAM

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III. PROCEDURE A. What is Voluntary Disclosure? Typically, a voluntary disclosure is made when a taxpayer has not filed one or more taxes and now wants to comply. The taxpayer may also seek abatement of penalties and/or a limit on the number of years it must file. The taxpayer or its representative may make the first contact with Finance. Also, the taxpayer may choose to remain anonymous until a written agreement is complete. The written agreement specifies the steps and payments necessary to satisfy any existing delinquent liability. No refund shall be granted or tax credit allowed, including applicable interest, for amounts paid under this program. B. Eligibility A taxpayer may make a voluntary disclosure for one or more tax periods and/or tax types provided:

the taxpayer is not currently under audit by Finance the taxpayer was not previously contacted by Finance regarding the liability the taxpayer is not a party to any criminal investigation being conducted by NYS or any

political subdivision of NYS the liability is not related to a tax avoidance transaction that is a Federal or NYS reportable

transaction A taxpayer is eligible even if the reason for the delinquency is intentional disregard of the tax obligation or fraud. Even though the taxpayer may want a limit on the number of years to file, the entire delinquent liability must be disclosed. This disclosure protects the taxpayer from audit and assessment for earlier years. If the delinquency is the result of mistake, confusion, ignorance of the law, inability to comply, or a similar reason, applicants may qualify for a three-year “look-back”. If the tax involved is a trust fund tax, the taxpayer may qualify for a six-year “look-back”. The taxpayer must also document the reason for not filing. That reason is subject to review as part of the audit process. Any voluntary disclosure and compliance agreement made between Finance and a taxpayer will become null and void if a taxpayer makes misrepresentations or omits facts in the voluntary disclosure request. C. Initial Contact A taxpayer may come forward directly or anonymously through a representative. The initial contact, whether by phone or in writing, should be made to the Voluntary Disclosure Coordinator. D. Voluntary Disclosure Process – From Request through Conclusion Taxpayers participating in the voluntary disclosure and compliance program generally want an advance written commitment from Finance to waive penalties and/or limit the number of years they must comply. We require the taxpayer to make the request for a voluntary disclosure and compliance agreement in writing and provide certain supporting information.

Page 3, Voluntary Disclosure PP-2009-1rev.

Finance will ask the taxpayer or the taxpayer's representative to include the following in the written request: 1) A statement of facts, anonymously if necessary, describing the taxpayer's activities in New York City and New York State, when these activities started, the number of employees, and their titles, involved in the activities. The statement should indicate the tax year they believe their tax obligation first began. (Note: There is no limit in the law as to how many past years Finance may examine for a non-filing entity under the voluntary disclosure and compliance program. The period is determined by the facts and circumstances. However, some taxpayers may qualify for a limited “look-back” period.) 2) A statement explaining why the taxpayer has failed to file tax returns and pay taxes in the past. 3) A computation of the taxpayer's approximate tax liability on a year-by-year basis for all the delinquent years. 4) An affirmation, prepared by either the taxpayer or its representative, that the taxpayer has not been previously contacted by Finance concerning any potential tax liability for the tax now being disclosed. The taxpayer must not be currently under audit for any City tax and the taxpayer understands that all disclosed facts are subject to audit. If it is determined a material fact has been omitted or misrepresented, the agreement becomes null and void. 5) For taxpayers requesting a limited “look-back” period, a statement that explains why the limited “look-back” is appropriate. Generally, a taxpayer will qualify for the three-year “look-back” if delinquency was caused by mistake, confusion, ignorance of the law, or some inability to comply. Most other taxpayers may qualify for a six-year “look-back”. Taxpayers will not qualify for the limited “look-back” if any of the following apply:

a) the taxpayer was a NYC filer in the past and had stopped filing NYC returns; b) the taxpayer has no current obligation to file NYC tax returns; or c) the delinquent obligation occurred as a result of changes made by the Internal Revenue Service or by New York State.

Taxpayers that do not qualify for the limited “look-back” period may still receive an agreement covering a longer period. 6) Other information or data deemed appropriate. Once the process is complete and Finance determines conditions for a voluntary disclosure and compliance agreement are satisfied, our representative and the taxpayer can discuss terms for a written voluntary disclosure and compliance agreement. The agreement must include the following elements or terms:

Page 4, Voluntary Disclosure PP-2009-1rev.

a) A summary of the facts and representations. b) Disposition of penalties. c) The period or periods for which returns must be filed and the period or periods that Finance will not audit the taxpayer or assess amounts due. d) A statement that all returns and representations are subject to audit. Any material omission or misrepresentation may result in rescinding the agreement. e) The agreed delinquent taxes must be paid within a specified time period. f) A commitment to file all tax returns and make estimated payments due, after the date of the agreement, on a timely basis.

All voluntary disclosure and compliance agreements must be reviewed and approved by the Coordinator. An authorized employee must sign the agreement for Finance. IV. UNIFIED PROGRAM Taxpayers that are delinquent for both NYS and NYC taxes may participate in the Unified Program. This program allows a taxpayer to make one request to participate in both the NYS and NYC VDCPs without making separate requests to each jurisdiction. As part of this program, NYC will conform to NYS procedures, including those requiring taxpayers to identify themselves on their application. The taxpayer receives one agreement detailing the terms of both jurisdictions. An authorized employee from each jurisdiction will sign the agreement. All requests to participate in the Unified Program must be made with NYS.

Voluntary DisclosureAnd Compliance ProgramWe’d love to hear from you... before you hear from us

2

3

4 Rev.10/6/2009

Before sending a formal written request, you may call 311 for more information. Please note that calling 311 is not a request to join the VDCP.

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NEW YORK CITY DEPARTMENT OF FINANCE

TAXRAPP 2015

NEW YORK CITY LITIGATION UPDATES

Moderator: Glenn Newman Shareholder Greenberg Traurig, LLP MetLife Building 200 Park Avenue New York, NY 10166 212.801.3190 newmang@gtlaw.com

Panelists: John J. Mulligan Senior Tax Counsel Legal Affairs Division NYC Department of Finance 345 Adams Street, 3rd Floor Brooklyn, NY 11201 718.488.2037 mulliganj@finance.nyc.gov

Amy F. Nogid Counsel Sutherland Asbill & Brennan LLP 1114 Avenue of the Americas New York, NY 10036 212.389.5086 amy.nogid@sutherland.com

Timothy P. Noonan Partner Hodgson Russ LLP 1540 Broadway (on 45) 24th Floor New York, NY 10036 716.848.1265 tnoonan@hodgsonruss.com

I. Unincorporated Business Tax (UBT): Deductibility of Payments to Employee-Partners of General Partner

§ Tocqueville Asset Management L.P., TAT 10-37 (E) (UB) (NYC Tax App.Trib., May 29, 2015)

§ The City Tax Appeals Tribunal (the “City Tribunal”) affirmed an ALJ determination sustaining the Notice of Determination asserting a UBT deficiency. The taxpayer had deducted on its UBT return the salaries paid to and the pension plan payments made on behalf of certain employees of the taxpayer’s general partner who were also the taxpayer’s limited partners (“Employee-Partners”). The Department of Finance (“Department”) disallowed the deduction on audit.

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§ The Taxpayer did not have any employees of its own. Instead, it used the employees

of its general partner to conduct operations. The taxpayer paid a management fee to the general partner for the general partner’s services, including the use of the general partner’s employees. The general partner did not include the management fee in its federal and UBT returns, and it did not deduct any of the related expenses, including the compensation to its employees. Rather, the taxpayer deducted on its federal and UBT returns each of the general partner’s expense items, including the compensation expenses mentioned above. Before 2005, the tax year at issue, the Employee-Partners were shareholders of the general partner. At the beginning of 2005, the general partner was restructured, and the shares of the employee-shareholders were redeemed in exchange for limited partnership interests in the taxpayer.

§ The City Tribunal concluded that the Department properly disallowed the deduction of the Employee-Partners’ compensation expenses as payments to partners for services under Admin. Code § 11-507(3). The City Tribunal held that the management fee, which was equal to the compensations expenses plus certain administrative expenses, fell squarely within the express terms of § 11-507(3). It also rejected the taxpayer’s contention that the deduction of the compensation expenses fell within the exception in 19 RCNY § 28-06(d)(i)(ii)(D) (the “D” Exception).

§ The D Exception allows a deduction for amounts paid to a partner to the extent the payment is for services provided by employees of the partner. The City Tribunal concluded that the D exception did not apply to the payments to the Employee-Partners, because they were also partners of the taxpayer. The City Tribunal also noted the situation did not qualify for the D Exception because the general partner did not include the management fee in its gross income for federal tax purposes.

§ The City Tribunal also rejected the taxpayer’s contention that Admin. Code § 11-507(3) should not apply because the Employee-Partners were not employees of the taxpayer and the taxpayer did not pay the compensation expenses to the Employee-Partners. The taxpayer claimed the Employee-Partners as employee for federal tax purposes, and, hence, could not now assert they were not its employees for purposes of § 11-507(3).

§ Further, even if the Employee-Partners were not the taxpayer’s employees, the City Tribunal concluded that the deduction for the compensation expenses would still be disallowed under 19 RCNY § 28-06(d)(1)(i)(B) which treats the payments to a third party as compensation for a partner’s services or capital as payments to the partner (the “Third-Party Payment Rule”). The City Tribunal rejected the taxpayer’s argument that the Third-Party Payment Rule should not apply, because it became effective in 2007, after the 2005 tax year. The City Tribunal stated the Third-Party

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Payment Rule had long-standing support in case law, and that the 2007 rule was a mere codification of exiting law.

II. UBT: Worker Status

§ Timothy J. Young, TAT(H) 12-19 (UB) (NYC Tax App. Trib., ALJ Div., Feb. 4, 2015)

§ The ALJ rejected the Department’s Notice of Deficiency against the taxpayer for the 2005 tax year. The ALJ concluded the taxpayer was an employee of the William J. Buckley Associates, Inc. (“Associates”), a broker-dealer member of the American Stock Exchange (the “Exchange”) , with whom the taxpayer was associated.

§ The taxpayer was a “floor clerk” on the exchange for Associates in 2005. The taxpayer’s primary duties included receiving telephone orders from customers at Associates’ desk on the exchange floor and then transmitting those orders to Associates principal, Mr. Buckley, who would then execute trades on the exchange floor. The taxpayer could also enter orders in the Exchange’s trading system, but only on a limited basis.

§ Associates paid for workers compensation coverage on for the taxpayer. Associates provided health insurance to the taxpayer through a third party who had formed a purchasing pool for small business such as Associates. The third party issued a federal form K-1 to the taxpayer and other who received health insurance showing the amount of the insurance payment.

§ The taxpayer claimed Associates paid him both a regular salary of $10,000 per month and a commission or bonus. Associates paid the taxpayer commission income of $565,000. This sum was paid to TJY Brokerage LLC (“TJY”), an LLC taxpayer established in February 2005. The W-2 form Associates issued to the taxpayer only indicated wages of $20,000, and this amount was paid over a period of 2 months in early 2005.

§ During 2005, with Associates’ consent, the taxpayer agreed to represent an unrelated entity, Raymond C. Forbes & Company (“RCF”) on the Exchange floor. But, the taxpayer did not perform any trades for RCF and he did not receive any payments for services from RCF. Also during 2005, and with Associates’ consent, the taxpayer entered into an employment arrangement with Lek Securities Corporation (“LSC”). The taxpayer did not receive any compensation from LSC in 2005. He apparently became a sales trader for LSC in 2006. The taxpayer also established a home office in 2005. However, the bulk of the work performed in this home office was for Associates.

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§ The ALJ concluded that under all of the facts and circumstances, the taxpayer was an employee of Associates during 2005 and was not subject to the UBT. The ALJ noted the taxpayer was clearly under the direction and control of Associates as to the hours and location of the work, as well as the particular duties that he had to perform. He also had no ability or authority to hire other people. Hence, Associates’ control over the taxpayer extended beyond control over the result to be accomplished, but also the details and means regarding the accomplishment of the result. The taxpayer’s activities concerning the other firms were subject to Associates’ approval and related to his efforts interest to become a partner in Associates, which occurred in 2006. These efforts were preliminary and did not result in any income in 2005.

III. Real Property Transfer Tax (RPTT)

§ GKK 2 Herald LLC, TAT(H) 13-25 (RP) (NYC Tax App. Trib., ALJ Div., Apr. 1, 2015)

§ The ALJ sustained Department’s Notice of Deficiency and upheld Department’s use of the step transaction doctrine in a RPTT matter.

§ In 2007, the taxpayer and another entity, SLG 2 Herald LLC (“SLG”), purchased certain real property located at 2 Herald Square, New York, NY (the “Property”). Under the 2007 deeds, the taxpayer acquired a 45 percent tenants-in-common (“TIC”) interest in the Property and SLG acquired a 55 percent interest in the Property. The taxpayer and SLG then, as lessors, entered into a ground lease with another entity, Sitt 2 Herald LLC, as lessee (the “Ground Lease”)

§ In December 2010, 2 Herald Owner LLC (“Herald”) was formed as a Delaware LLC. Later that month, on December 22, 2010, the taxpayer and SLG executed a TIC Contribution Agreement under which the taxpayer and SLG contributed their TIC interests in the Property to Herald. In return, SLG received a 55 percent interest in Herald, and the taxpayer received a 45 percent interest in Herald.

§ The same day, the taxpayer and SLG executed a purchase agreement in which SLG purchased the taxpayer’s 45 percent interest in Herald. Under a separate Assignment and Assumption Agreement, the taxpayer withdrew from Herald.

§ Various provisions of the TIC Contribution agreement also contemplated the taxpayer’s sale of its interest. For example, the taxpayer was to be released from its mortgage loan obligations and the return of a letter of credit issued to secure those obligations to the taxpayer. Also, the taxpayer was responsible for any transfer tax arising from the execution of the TIC agreement.

§ The taxpayer and SLG filed an RPTT return for the Contribution of the Property which stated the conveyance was exempt from RPTT as a “mere change in form” under Admin. Code § 11-2106(b)(8), The taxpayer also filed an RPTT return for

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the sale of its interest in Herald which stated the transfer was not taxable as a transfer of a non-controlling economic interest in an entity owning real property. See Admin. Code §§ 11-2-11(7), 2101(8), 2102(b). On audit, the Department concluded that the transactions resulted in a 45 percent taxable change in beneficial ownership.

§ The ALJ concluded the application of the step transaction doctrine was appropriate. Under the circumstances, it was unlikely the conversion of the taxpayer’s TIC interest to its membership interest in Herald or the sale of that membership interest would have occurred without the other. Hence, the step transaction doctrine applied because the “interdependence test” had been met.

§ The ALJ also concluded that each of the events in December 2010 were part of one transaction, the end result of which was taxpayer’s sale of its 45 percent TIC interest to SLG while avoiding RPTT on that transaction. Hence, the step transaction doctrine applied because the “end result test” had been met. The ALJ also noted that it was unclear that the 45 percent TIC interest was truly the same beneficial interest as the 45 percent membership interest in Herald, because the taxpayer did not appear to have a clear right to income from the Property under Herald’s LLC operating agreement.

§ Jonis Realty / E. 29th Street, LLC, TAT(H) 09-9 (RP) (NYC Tax App. Trib., ALJ Div., Sept. 9, 2015)

§ The ALJ rejected Department’s denial of a refund claimed for RPTT paid and granted the refund claim. Prior to August 2005, Steven Halegua and his brother Nathan Halegua each owned a 46.5 percent interest in, Jonis Realty/E 29th Street, LLC (“Jonis”). Nathan’s son, Joshua Halegua, owned the remaining 7 percent. Jonis held a 96 percent interest in 39 East 29th Street, LLC (“39 E 29 LLC”), which owned parcels of real property located at 39-43 East 29th Street (collectively with another adjacent parcel, the “Property”). An unrelated party owned the other 4 percent of 39 E 29 LLC.

§ As part of Nathan’s effort to obtain capital to redevelop the property, Jonis transferred a 30 percent interest in 39 E 29 LLC to 39 East 29th Street LP (the “Transferee”) in August 2005. 39 E 29 LLC used the proceeds from this transfer to purchase the adjacent parcel, 45 East 29th Street. A few months later, Jonis transferred an additional 18 percent interest in 39 E 29 LLC to the transferee. At that point, Jonis and the Transferee each had a 48 percent beneficial interest in the Property, with an unrelated party having the remaining 4 percent beneficial interest in the Property. At that time, the uncontroverted evidence showed that Nathan and Steven did not contemplate any further transfers of Jonis’s interest in 39 E 29 LLC.

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§ Some months later, Steven became very uneasy about the situation because he could not get answers about the redevelopment of the Property, and he was not receiving any income from the Property. As a result, on March 14, 2006, Steven transferred his beneficial interest in the Property. This transfer was accomplished through Jonis’ transfer of another 22.32 percent interest in 39 E 29 LLC to the Transferee. Following this transfer, the beneficial ownership of the Property was 70.32 percent for the Transferee, 25.68 percent for Jonis and 4 percent for the unrelated party. Nathan did not want Steven to make the transfer and the transfer led to some bitterness and acrimony between the brothers.

§ The sales proceeds resulting from this third transfer were distributed directly to Steven. Jonis filed an RPTT return and paid tax, including interest and penalty on the third transfer, believing that RPTT was due because Jonis’ three transfers to the Transferee should be aggregated. The RPTT amount was paid out of the sale proceeds from the third transfer, which had been withheld from Steven. Jonis submitted a refund claim signed by Steven.

§ The ALJ concluded that the third transfer should not be aggregated with the first two, and, therefore, there was no transfer of a controlling interest triggering RPTT. The definition of controlling interest in 19 RCNY § 23-02 provides that related transfers are aggregated to determine if there has been a transfer of a controlling interest. The definition further provides that transfers within a 3-year period are presumed to be related and are aggregated unless the grantor or grantee is able to rebut the presumption.

§ Steven, whom the ALJ determined was the real party in interest, was able to show the third transfer was unplanned, unexpected and occurred for independent reasons. Based on the uncontroverted evidence, the ALJ concluded the third transfer was unrelated because it was unplanned, unexpected and occurred for independent reasons. Indeed, the ALJ noted the third transfer led to bitterness and acrimony between Nathan and Steven. Therefore, Steven had rebutted the presumption set forth in the definition of controlling interest in 19 RCNY § 23-02.

IV. General Corporation Tax (GCT): Business Characterization of Health Maintenance Organizations (HMOs)

§ Matter of Aetna, Inc., TAT(H) 12-3(GC) & TAT 12-4(GC) (NYC Tax App. Trib. ALJ Div. July 22, 2014)

§ Case involves the determination of whether the HMOs were insurance companies and are includible in a combined GCT return with their holding company parent, Aetna, Inc.

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§ Taxpayer asserted that the HMOs were “doing an insurance business” under the GCT’s enabling legislation (L. 1966, ch. 772, Model Act § 41[4]).

§ The Department argued that the HMOs were not doing an insurance business in New York under the GCT’s enabling legislation, or when read in pari materia with the State Health Law, the State Tax Law and the City Administrative Code, and that the HMOs are only providing access to health care services, not insurance.

• The Department pointed to a 2009 amendment to Article 33, the State’s premiums tax on insurance companies that explicitly subjected HMOs to the tax, for its position that prior to that time HMOs were not considered as doing an insurance business for tax purposes.

§ Until 1974, the City imposed an Insurance Corporation Tax. Companies subject to the Insurance Corporation Tax were exempt from the GCT.

§ The Insurance Corporation Tax was repealed in 1974, however, the enabling legislation was not revised to remove the GCT’s exemption for companies doing an insurance business in New York State.

§ The ALJ considered the three prong test for determining whether insurance is provided: (1) insurance risk; (2) risk shifting and risk distribution; and (3) commonly accepted notions of insurance, and determined, after evaluating federal, other state and State law in various contexts that insurance risk is present in the contracts between the HMOs and their members, that risk is distributed amongst the HMOs’ members and that the State Insurance Law and the State Public Health Law regulate the HMOs.

§ The ALJ rejected the City’s argument that the exemption provided under the GCT for insurance companies should be narrowly construed, recognizing that “an exemption should not be interpreted so narrowly as to defeat its settled purpose.”

V. GCT: Apportionment

§ Matter of The McGraw-Hill Companies, Inc., TAT(H) 10-19(GC) (NYC Tax App. Trib. ALJ Div. Feb. 24, 2014)

§ Case involves whether in computing the receipts factor, the taxpayer could include receipts for credit rating earned by one of its divisions that were allocated by the audience method and whether taxpayer was a manufacturer entitled to double-weight its receipts factor.

§ Taxpayer, The McGraw-Hill Companies, Inc. is a publisher and provider of information services. One of its divisions, Standard & Poor’s (S&P), was a credit ratings business.

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§ On certain of its original returns, McGraw-Hill sourced S&P’s receipts on an origin basis, but filed amended returns and later original returns on its position that S&P’s receipts from its activities constituted “other business receipts” that were required to be sourced to the location of the customer.

§ Taxpayer had entered into agreements with New York State Department of Taxation & Finance. The first agreement provided that the S&P debt-rating receipts factor would be computed on a destination basis with a 50% reduction in the numerator, and the second agreement sourced receipts based on the location of the customer with a 50% reduction in the numerator. The 50% reduction in the numerator was applied to reflect the user-audience for S&P’s credit ratings.

§ Taxpayer sought a ruling from the Department seeking revision of the S&P receipts factor, but the Department would not agree to issue a ruling.

§ In an interesting turn for a tax case, the ALJ ruled that S&P’s credit ratings were protected speech under the First Amendment to the Constitution, and that as part of a protected class of publishers, S&P could not be treated differently from other members of the press.

§ The ALJ concluded that S&P’s credit rating receipts were “other business receipts” and that S&P’s receipts should be allocated in the same manner as publishers, which require a method based on circulation or audience. Since the method proposed by S&P, which takes into account subscription and audience matrices, the ALJ concluded that the method should be allowed as a discretionary adjustment.

§ The ALJ found that less than 50% of McGraw-Hill’s income was from manufacturing activities and that it could not, therefore, double weight its receipts factor.

VI. Bank Tax: Combined Reporting

§ Matter of Astoria Financial Corp., TAT(H) 10-35 (BT) (NYC Tax App. Trib. ALJ Div. Oct. 29, 2014)

§ Case involves the Department’s attempt to require the inclusion of a wholly owned subsidiary that did no business in New York into a combined return with the taxpayer.

§ The taxpayer, Astoria Financial, a holding company that owned Astoria Federal Savings & Loan Association (Astoria), argued that Astoria’s subsidiary, Fidata, should not be included in Astoria Financial’s City bank tax combined return.

§ Fidata was a New York corporation that Astoria acquired from a third party in 1995, and was dormant until 2005 when it became a Connecticut passive investment company (PIC) formed to hold non-New York mortgages. However, for New York State purposes it was a “grandfathered” Article 9-A corporation.

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Under NY Tax Law § 1452(d), grandfathered Article 9-A corporations cannot be included in State bank tax combined returns. Since it did not do business in the City, it did not file GCT returns. As a nonfiler, it could not elect to remain subject to GCT rather than the bank tax.

§ Connecticut PICs are not subject to Connecticut’s corporation business tax, and dividends received from a Connecticut PIC are not considered “gross income.” Connecticut PICs are required to maintain a Connecticut office and to employee at least five full-time employees.

§ Fidata administered the loans, but did not solicit, investigate, negotiate or approve the loans. Astoria was paid by Fidata to service and administer the loans under a Master Loan Servicing Agreement and the companies entered into an Expense Sharing Agreement and a Custodial Agreement, all of which were asserted to be at arm’s length rates.

§ The Department argued that Fidata was a “sham,” that it lacked economic substance, was not formed for a valid business purpose, and was formed to avoid the City’s bank tax. The Department also argued that intercompany transactions were not at arm’s length.

§ The taxpayer countered that Fidata had economic substance and was formed for the business purpose of maintaining Astoria’s Community Reinvestment Act (CRA) rating by segregating non-New York mortgages, and that the transactions were all at arm’s length rates.

§ The ALJ concluded that Fidata was not a sham corporation, was formed for legitimate non-tax business purposes as well as to secure tax benefits as a Connecticut PIC.

§ The ALJ also concluded that the intercompany transactions identified by the Department (establishing Fidata as a PIC, Astoria’s funding of Fidata by capital contribution, Fidata’s distribution of dividends to Astoria, Fidata’s purchase of loans from Astoria, Astoria’s servicing of Fidata’s mortgages, and Astoria’s provision of administrative services to Fidata) were not distortive.

§ Finally, the ALJ concluded that there was no “mismatch” of income caused by the relationship between Astoria and Fidata and that Matter of Interaudi Bank F/K/A Bank Audi (USA), DTA No. 821659 (NYS Tax App. Trib. Apr. 14, 2001) was neither “on all fours” since the facts were not analogous, or precedential, since Interaudi did not announce a new binding legal principle.

§ The ALJ cancelled the assessment.

VII. State: Corporate Franchise Tax Combined Reporting

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§ Matter of Knowledge Learning Corp. and Kindercare Learning Centers, Inc., Dkt. No. 823962, 823963 (NYS Tax App. Trib., Sept. 18, 2014)

§ The Tax Appeals Tribunal reversed an ALJ determination and found that the taxpayers had engaged in substantial intercorporate transactions and that, therefore, combined reporting was required pursuant to Tax Law § 211(4).

§ For tax years commencing on or after January 1, 2007, Tax Law § 211(4)(a) was amended to require combined reporting where the substantial ownership requirement was met and where there were substantial intercorporate transactions among the related corporations, regardless of the transfer price for such intercorporate transactions.

§ The substantial intercorporate transactions in this case took the form of employee transfers between entities and reimbursement at cost for the transferred employees.

§ The Tribunal determined that these transfers were part of the taxpayers’ reasonable business strategy of operating their subsidiaries as a single business. The transfers therefore had a valid business purpose and economic substance.

§ The Tribunal also found that it was erroneous for the ALJ to conclude that, following the 2007 amendments to Tax Law § 211(4), distortion was no longer a factor in the determination of combined filing.

§ Matter of SunGard Capital Corp. and Subsidiaries, Dkt. No. 824336 (NYS Tax App. Trib., May 19, 2015)

§ The Tax Appeals Tribunal reversed an ALJ determination and allowed a group of related corporations to file on a combined basis. The taxpayers in the case claimed refunds for the period August 13, 2005 through December 31, 2005 and for the calendar year 2006 by filing amended franchise tax returns on a combined basis for these periods. The refunds claimed in the amended filings were denied.

§ The combined group’s primary line of business involved providing IT sales and services (data processing, information availability, software solutions and software licensing, etc.) to four main business segments. The taxpayers met the unity of ownership requirement for combined filing since the entities were commonly owned and controlled. The dispute lied in whether the taxpayers were engaged in a unitary business and whether separate filings resulted in distortion.

§ The ALJ upheld the denied refund claims, concluding that while there were similarities among the segments, the segments were too distinct to qualify as a unitary business.

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§ The Tribunal reversed the ALJ upon finding that the record established that the entities were engaged in a unitary business during the periods underlying the refund claims, specifically that “the Group’s various entities were engaged in the same or related lines of business within the meaning of the Division’s regulations and federal unitary doctrine.” Unlike the ALJ, the Tribunal found that the various segments complemented each other and were sufficiently similar for the unitary business analysis.

§ The Tribunal’s reversal focused on particular indicia of the unitary business, specifically the group’s centralized management, the absence of reimbursement for centralized corporate-level functions and services which resulted in “an obvious flow of value,” the group’s consolidated purchasing services which allowed the group to benefit from volume discounts, various financing arrangements where members guaranteed other members’ debts, and cross-selling efforts that “resulted in a flow of value between the various business segments.”

§ While the case involved pre-reform law, the Tribunal’s unitary business analysis remains applicable.

VIII. State: IRC § 338(h)(10) Retroactivity

§ Burton v. New York State Dep’t of Taxation & Fin., 25 NY3d 732 (2015), aff’g 43 Misc. 3d 312 (N.Y. Sup. Ct. Albany County 2014)

§ Case involves the sale of S corporation stock by nonresident shareholders pursuant to an IRC § 338(h)(10) election.

§ Taxpayers sold their stock in 2007. At the time, Tax Law § 632(a)(2) prohibited this income from being treated as New York source income to a nonresident, as the Tribunal held in Matter of Baum, Dkt. No. 820837 & 820838 (NYS Tax App. Trib., Feb. 12, 2009).

§ Section 632(a)(2) was retroactively amended in 2010 to “undo” the Tribunal’s decision in Baum, and the amendment was made effective to years beginning on or after January 1, 2007. L. 2010, ch. 312, pt. B, § 1.

§ Taxpayers argued the amendment violated Article 16, section 3, of the N.Y. Constitution which prohibits New York from taxing the sale of a nonresident’s intangible personal property, and that the Department’s reliance on the amendment was unconstitutional.

§ Notably, the taxpayers withdrew the argument that the retroactive enforcement of the law was unconstitutional, at oral argument.

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§ Court rejected the taxpayers’ argument and held that since the transaction was treated as an “asset sale” per the federal election, taxing the gain “did not run afoul of the constitutional prohibition against taxing a nonresident's intangible personal property.”

§ Caprio v. New York State Dept. of Taxation & Fin., 25 NY3d 744 (2015), rev’g 117 A.D.3d 168 (1st Dep’t 2014)

§ The case began in N.Y. County Supreme court where the Caprios challenged the retroactive application of the 2010 amendment to Tax Law § 632(a)(2), arguing that the amendment, as applied, violated the Due Process Clauses of the federal and New York State Constitutions.

§ Tax Law § 632(a)(2) was amended in 2010 with respect to nonresident S corporation shareholders who received installment obligations in exchange for their S corporation stock under IRC § 453(h)(1)(A). The 2010 amendment was made retroactive to the 2007 tax year. See L. 2010, Ch. 57, pt. C, § 1.

§ Under IRC § 453(h)(1)(A), an S corporation shareholder who exchanges S corporation stock for installment obligations (in a liquidation to which IRC § 331 applies) received by the S corporation in a sale or exchange, is treated as receiving payment for the sale of stock upon receipt of the installment payments. However, the 2010 amendment require nonresident shareholders receiving distributions of installment obligations to source the gain recognized on the payments according to the S corporation’s business allocation percentage. It specifically targeted and intended to overturn a 2009 New York ALJ determination, Matter of Mintz, Dkt. No. 821807 & 821806 (NYS Div. of Tax App., June 4, 2009).

§ The Caprios were nonresidents of NYS who sold their S corporation stock in 2007. Both the Caprios and the buyers made elections under IRC § 338(h)(10), and the Caprios also received a liquidating distribution of installment obligations in exchange for their S corporation stock under IRC § 453(h)(1)(A).

§ In 2014, the Appellate Division, First Department, overturned the New York County Supreme Court and held that the retroactive application of the 2010 amendment denied the Caprios due process based on a three-factor ‘‘balancing-of-the-equities’’ test because (1) the Caprios reasonably relied on the existing law in 2007 to structure their transaction, and had no forewarning of the change made by the 2010 amendment, (2) the 3 ½ year retroactivity period was excessive and the amendment was not curative, and (3) the public purpose for the retroactive

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application of the 2010 amendment asserted by the Tax Department was not convincing. The Court of Appeals disagreed.

§ In reversing the First Department, the Court of Appeals (1) discounted the Caprios’ reliance on the law in place during 2007, (2) noted that retroactivity periods in excess of 3 ½ years have been accepted, and (3) found that the amendment was curative in nature.

IX. State: Personal Income Tax: Review of Federal Taxability

§ Matter of Steve and Linda Horn, Dkt. No. 825333(NYS Div. of Tax App., July 2, 2015)

§ This case involved the IRC § 183 “hobby loss” rules. The Tax Department argued that an S corporation was not a for-profit endeavor and therefore, the Horns were not entitled to claim losses that passed through to their returns during the years in question.

§ Mrs. Horn owned 100% of the Company’s stock in an S corporation (the “Company”) and the Horns’ returns for 2004-2009 reported all of the income and losses that passed through to Mrs. Horn from the Company. The Horns were issued a Notice of Deficiency for 2004-2009 asserting personal income tax due by them. The tax was calculated by disallowing all of the Company’s losses and its net operating loss (NOL) carryforwards and carrybacks. Basically, all adjustments related to issues of federal tax law.

§ The Company, formed in 1974, had three lines of business: a television commercial production business, an antiques business, and a real estate investment business. It employed between 14-20 employees in 2004-2009, though it reported losses each year. The Horns loaned $31 million to the Company during these years and the Company paid them interest on the loans.

§ The television commercial production business was initially quite successful but production business declined in early-2004 to 2005, and came to an end. The antiques business operated in a Manhattan storefront and also online during 2004-2009. From 2004-2006, it was a division of the Company operated as a “d/b/a” but was transferred to a wholly-owned LLC in 2006. The Company entered into several significant real estate deals during 2004-2009 in both New York and Florida, including IRC § 1031 like-kind exchanges.

§ The Tax Department audited the Company for 2004-2009 and determined that one of the like-kind exchanges didn’t qualify for deferred gain treatment. It further determined that the company was not engaged in for profit for IRC § 183

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purposes because: (1) theshareholder does not depend on the income from the business, (2) the business has not made a profit in at least the last eight years of operation, (3) losses were not due to circumstances beyond their control and they did not occur in the start-up phase of their business, and (4) the business has not changed their methods of operation to improve profitability.

§ The Horns argued the three lines of business should be treated as one activity for IRC § 183 purposes. The Tax Department argued the commercial production businesses ended at the beginning of the audit period and the Horns were not engaged in real estate activities because the Company bought only four properties and sold only one during the years at issue (though they claimed significant NOL carryforwards and carrybacks each year).

§ The ALJ decided the issue based on factors applied by the courts in deciding whether the characterization of several undertakings as one activity is unreasonable for IRC § 183 purposes: (1) the location of activities, (2) activities as efforts to derive revenue from land, (3), whether the undertakings were formed as separate activities, (4) each activity’s benefit to the others, (5) cross-advertising, (6) shared management, (7) shared caretaker, (8) shared accountants, and (9) shared books and records. The factors seek to determine whether the undertakings are run in a businesslike manner.

§ After examining these factors, the ALJ concluded that the Company’s activities were run in a businesslike manner and therefore, the Horns had a profit objective and the Company’s losses were properly passed through to their returns for 2004-2009.

NEWYORKCITYLITIGATIONUPDATE

TaxRAPP2015Moderator:GlennNewman,Shareholder,Greenberg

Traurig,LLPPanelists:JohnJ.Mulligan,NYCDepartmentofFinanceAmyF.Nogid,Counsel,SutherlandAsbill&BrennanLLP

TimothyP.Noonan,Partner,HodgsonRussLLP

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UnincorporatedBusinessTax(UBT):PaymentstoPartners

•  Tocqueville Asset Management L.P., TAT 10-37 (E) (UB) (NYC Tax App.Trib., May 29, 2015) – Tribunal upheld disallowance of deduction for

salaries paid to and the pension plan payments made on behalf of certain employees of the taxpayer’s general partner who were also the taxpayer’s limited partners.

2

UBT:WorkerStatus

•  Timothy J. Young, TAT(H) 12-19 (UB) (NYC Tax App. Trib., ALJ Div., Feb. 4, 2015) – ALJrejectedDepartment’saNempttocharacterizeafloorclerkontheAmericanStockExchangeasanindependentcontractoroperaTnganunincorporatedbusinesssubjecttotheUBT.

3

RealPropertyTransferTax(RPTT)

•  GKK 2 Herald LLC, TAT(H) 13-25 (RP) (NYC Tax App. Trib., ALJ Div., Apr. 1, 2015) – Applying the step-transaction doctrine, the ALJ

found that instead of a mere change in form qualifying for exemption and the transfer of a non-controlling economic interest in real property not subject to RPTT, a taxable transfer of an interest in real property occurred.

4

GKK2HeraldLLC

5

GKK2HeraldLLC

6

GKK2HeraldLLC

7

RPTT

•  JonisRealty/E.29thStreet,LLC,TAT(H)09-9(RP)(NYCTaxApp.Trib.,ALJDiv.,Sept.9,2015)– ALJheldthatnotransferofacontrollingeconomicinterestinrealpropertyoccurred,sinceoneofthetransferswasunplannedandtookplaceforindependentreasons;theregulatorypresumpTonforaggregaTngtransacTonsoccurringwithinathree-yearperiodwasrebuNed.

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GeneralCorporaMonTax(GCT);CharacterizaMonofHealthMaintenanceOrganizaMons(HMOs)

•  Ma9erofAetna,Inc.,TAT(H)12-3(GC)&TAT12-4(GC)(NYCTaxApp.Trib.ALJDiv.July22,2014)– HMOswereheldbyALJtobeinsurancecompaniesthatwereexemptfromtheGCTandcouldnotbeincludedinacombinedGCTreturnwiththeirholdingcompanyparent.

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GCT:ApporMonment•  Ma9erofTheMcGraw-HillCompanies,Inc.,TAT(H)10-19(GC)(NYCTaxApp.Trib.ALJDiv.Feb.24,2014)– ALJconcludedthatthereceiptsfromStandard&Poor’screditraTngservicesconsTtuted“otherbusinessreceipts”andthatsuchservicesconsTtutedprotectedspeechundertheFirstAmendmenttotheConsTtuTon,requiringthatsuchreceiptsbetreatednodifferentlyfromotherpublishingreceipts,i.e.,amethodbasedoncirculaTonandaudience.SinceS&P’sproposedmethodtooksuchfactorsintoaccount,theALJallowedsuchmethodasadiscreTonaryadjustment.

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BankTax:CombinedReporMng

•  Ma9erofAstoriaFinancialCorp.,TAT(H)10-35(BT)(NYCTaxApp.Trib.ALJDiv.Oct.29,2014)– ALJconcludedthatasubsidiary,Fidata,aConnecTcutpassiveinvestmentcompany,hadeconomicsubstanceandwasformedforvalidbusinessreasons,andthatitstransacTonswithitsaffiliateswerenotdistorTveanddidnotresultinamismatchofincome;itcouldnotbeincludedinacombinedreturnwithitsparent.

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State:CorporateFranchiseTaxCombinedReporMng

•  Ma9erofKnowledgeLearningCorp.andKindercareLearningCenters,Inc.,Dkt.No.823962,823963(NYSTaxApp.Trib.,Sept.18,2014)–  TheStateTribunalreversedtheALJandheldthatcombinaTonwasnotrequiredeventhoughthereweresubstanTalintercorporatetransacTons,thetransferofemployeesbetweenenTTesandreimbursementatcost,becausethetransacTonshadavalidbusinesspurposeandeconomicsubstanceandwerenotdistorTve.

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State: Corporate Franchise Tax Combined Reporting

•  Matter of SunGard Capital Corp. and Subsidiaries, Dkt. No. 824336 (NYS Tax App. Trib., May 19, 2015) –  The State Tribunal reversed the ALJ and allowed a group of

related corporations to file a combined return because they were engaged in a unitary business. •  The unitary determination focused on particular indicia of the

unitary business, specifically the group’s centralized management, the absence of reimbursement for centralized corporate-level functions and services which resulted in “an obvious flow of value,” the group’s consolidated purchasing services which allowed the group to benefit from volume discounts, various financing arrangements where members guaranteed other members’ debts, and cross-selling efforts that “resulted in a flow of value between the various business segments.”

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State:IRC§338(h)(10)RetroacMvity

•  Burton v. New York State Dep’t of Taxation & Fin., 25 NY3d 732 (2015), aff’g 43 Misc. 3d 312 (N.Y. Sup. Ct. Albany County 2014)

•  Caprio v. New York State Dept. of Taxation & Fin., 25 NY3d 744 (2015), rev’g 117 A.D.3d 168 (1st Dep’t 2014) –  Both cases address the 2010 amendments to Tax Law § 632(a)(2) to “undo” State Tribunal’s

decisions related to treatment of sales of S corporation stock by nonresident S corporation shareholders: •  Matter of Baum, Dkt. No. 820837 & 820838 (NYS Tax App. Trib., Feb. 12, 2009), found that the section prohibited the

sale of S corporation stock by nonresident shareholders pursuant to an IRC § 338(h)(10) election from being treated as New York source income.

•  Matter of Mintz, Dkt. No. 821807 & 821806 (NYS Div. of Tax App., June 4, 2009), finding that, consistent with IRC § 453(h)(1)(A), an S corporation shareholder who exchanges S corporation stock for installment obligations (in a liquidation to which IRC § 331 applies) received by the S corporation in a sale or exchange, is treated as receiving payment for the sale of stock upon receipt of the installment payments.

–  Burton found that since the transaction was treated as an “asset sale” per the federal election, taxing the gain “did not run afoul of the constitutional prohibition against taxing a nonresident's intangible personal property.” (The retroactivity argument was withdrawn by Burton during oral argument.)

–  Court of Appeals rejected the Caprios’ argument that the retroactive legislation violated their rights to due process, finding that the legislation was “curative.”

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State: Personal Income Tax: Review of Federal Taxability

•  Matter of Steve and Linda Horn, Dkt. No. 825333 (NYS Div. of Tax App., July 2, 2015) – Department adjusted taxpayers’ income based on

the Department’s evaluation of whether they could claim losses under IRC § 183 “hobby loss” rules.

15

QuesMons????

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TaxRAPP2015Moderator: Glenn Newman Shareholder Greenberg Traurig, LLP MetLife Building 200 Park Avenue New York, NY 10166 212.801.3190 newmang@gtlaw.com

Panelists: John J. Mulligan Senior Tax Counsel Legal Affairs Division NYC Department of Finance 345 Adams Street, 3rd Floor Brooklyn, NY 11201 718.488.2037 mulliganj@finance.nyc.gov

Amy F. Nogid Counsel Sutherland Asbill & Brennan LLP 1114 Avenue of the Americas New York, NY 10036 212.389.5086 amy.nogid@sutherland.com

Timothy P. Noonan Partner Hodgson Russ LLP 1540 Broadway (on 45) 24th Floor New York, NY 10036 716.848.1265 tnoonan@hodgsonruss.com

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