Corporate Tax Reform FAQs

Since the new corporate tax reform went into effect on January 1, 2015, the New York State Department of Taxation and Finance has been providing “general guidance” -- answers to frequently asked questions (FAQs) -- on topics of interest to taxpayers. Recently, the Tax Department clarified two administrative issues with combined filing under the new regime and issued an FAQ with respect to the proper completion of the apportionment schedule on the return.

One new FAQ addresses the problem of combined filing by corporations with different tax years. The controlling tax year will be that of the designated agent. All other corporations on the combined return will simply include their activity for their tax year ending within the tax year of the designated agent. Thus, a corporation with a fiscal year ending September 30^th, will include the activities from its return for the period 10/1/15 – 9/30/16 on a combined return for the 2016 calendar year where the designated agent is a calendar year taxpayer.

The second new FAQ says the designated agent should file a single extension request for all members of a newly formed or pre-existing combined group. But a taxpayer member being added to an existing combined group must file a separate request for extension to file for the first period they will be included in the combined group. In other words, if the combined group changes and new members are added, there will likely need to be more than one extension request filed. But non-taxpayer members are never required to file their own extension request.

There is also a new FAQ regarding notice and demands being issued applying a 100 percent business apportionment factor if you complete the apportionment schedule wrong. Taxpayers should take notice of this announcement as they may be very surprised when New York State changes their apportionment percentage to 100% and issues them a bill for the additional tax.

Based on this FAQ, the Tax Department will be taking a close look at the apportionment schedule and rejecting those that are incomplete. If a taxpayer does not include receipts information, puts zero in the everywhere column of the schedule, or elects separate accounting treatment for a limited partnership without properly indicating the NYS and everywhere receipts for the partnership, the Tax Department will ignore the form, re-compute the tax due using a BAP of 100%, and issue a Notice and Demand for additional tax (as well as interest and perhaps penalties).

The FAQs may be found at the Department’s website here.

Comment