State Tax Department Releases New Draft Article 9-A Combined Reporting Regulations -

The New York State Department of Taxation and Finance has released draft amendments to the Article 9-A corporate franchise tax regulations to address significant changes relating to combined reporting under New York State corporate tax reform legislation enacted in 2014 and 2015. Corporate Tax Reform Draft Regulations, Combined Reports, (N.Y.S. Dep’t of Taxation & Fin., Jan. 22, 2016).

Under corporate tax reform legislation, which went into effect for tax years beginning on or after January 1, 2015, a taxpayer is required to file combined returns including unitary corporations in which it has more than 50% of the voting power. The distortion test for mandatory combination under prior law, including the substantial intercorporate transactions test, is eliminated. The law includes several exceptions to unitary combined filing, including an exception for alien corporations that have no federal effectively connected income and that are not classified as “domestic” corporations for federal tax purposes. Notably, the new law also allows commonly owned corporations to make a binding seven-year election to file on a combined basis if the 50% voting power test is met, whether or not a unitary relationship exists. Except with respect to eligibility for tax credits, the combined group will generally be treated as if it were a single entity.