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State and Local Tax Blog

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Taxes in New York (TiNY) is a blog by the Hodgson Russ LLP State and Local Tax Practice Group. The weekly reports are intended to go out within 24 hours of the Division of Tax Appeals’ (DTA) publication of new ALJ Determinations and Tribunal Decisions. In addition to the weekly reports TiNY may provide analysis of and commentary on other developments in the world of New York tax law.  

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TiNY Report for August 4, 2017 (reporting on DTA cases issued the Week of July 23)

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A TAT decision, an ALJ Order, and two other newsworthy tidbits to report this week.


Anthony Giardina is the newest member of the Tax Appeals Tribunal.  The Senate Finance Committee Hearing in which his nomination was recommended for vote by the full Senate is at  His relevant experience includes (but is not limited to) a stint in the NYC corporation counsel’s office doing some real property tax and special franchise tax litigation.  Congratulations Commissioner Giardina.  We hope you’ll become a TiNY reader.  

Yesterday the Department issued “Guidance” NYT-G-17(2)C (August 2, 2017).  The Guidance claims that it has always been the Department’s policy to limit the favorable registered  broker-dealer treatment to just those receipts from the entity that is actually registered with the SEC.  So, for example, if an unregistered entity is the single-owner of a disregarded SMLLC which is a registered broker-dealer, the Guidance would permit only the receipts earned by the SMLLC (and not those earned by its owner) to receive the favorable treatment.  We find it difficult to reconcile the Guidance’s message with the following passage from TSB-A-13(11)C:  “The Department has concluded that certification under the Empire Zones Program of a SMLLC that is a disregarded entity treated for tax purposes as a division of its single member is treated as the certification of the single member See TSB-A-12(6)C, 10/15/12. This type of conclusion should be extended to the registration of broker-dealers with the Securities and Exchange Commission. Thus, if a SMLLC that is treated for tax purposes as a disregarded entity is a registered broker-dealer, its single member should be treated for purposes of the allocation rules under Tax Law § 210.3(a)(9) as a registered broker-dealer.” 


Matter of Schahet et. al.; Judge Maloney; Division’s Rep: Tobias Lake; Taxpayer’s Rep: Chris Doyle and Ariele Doolittle; Article 22.  The parties agreed to the simultaneous filing of Summary Determination/dismissal motions on what, they argued, were matters of law.  The Division moved to dismiss on the grounds that the Division of Tax Appeals did not have the jurisdiction to adjudicate a discretionary act by the Commissioner (said act being the denial of a retroactive basis adjustment under Tax Law §15(e)(A)(ii)).  The ALJ denied that motion finding that the DTA absolutely has the power to determine whether an exercise of discretion is arbitrary and capricious where the exercise of discretion affects an asserted tax liability that is properly before the DTA.  Both parties brought motions for summary determination on two substantive issues involving the tax aspects of the Empire Zones Program: (1) the proper computation of the PILOT “cap” when determining the real property tax credit, and (2) the propriety of the Commissioner granting a prospective basis adjustment but not a retroactive basis adjustment for purposes of the RPTC.  The Judge denied both parties’ motions  finding that “material and triable issues of fact exist in these matters.”  Hodgson Russ attorneys represent the Petitioners.  Your TiNY production team considered a policy of not mentioning cases in which Hodgson Russ represents the petitioners.  But there are a lot of them, and keeping our mouths shut is not really in our DNA.  That said, we have a duty and a sincere desire to act in our clients’ best interests; and we figure the best way to do that and still have comprehensive coverage of the DTA cases is to adopt a Joe Friday-esque “Just the facts, ma’am” approach for Hodgson Russ matters.  So our policy is to report the Hodgson cases but to refrain from editorializing about them until the matter is final.  Thith ith the thound of uth bithing our thongueth.



Matter of Stewart’s Shops Corporation; Division’s Rep: Clifford Peterson and Bruce Lennard; Taxpayer’s Rep: Scott M. Susko, Richard C. Call, and Peter L. Faber; Article 9-A.  This case involved a taxpayer parent company that made premium payments to its captive insurance subsidiary.  Usually premium payments for insurance may be deducted from gross income in the calculation of federal taxable income (the starting point in calculating entire net income, the Article 9-A tax base at issue here).  However, the Tribunal found that premium payments are not deductible federally when there is no risk shifting and risk distribution.  Here, a captive insurance subsidiary accepted the premium payments only from its parent, and the Tribunal found that the risk was not shifted from the parent since any payment on a claim would reduce the subsidiary’s value which, in turn, would reduce the parent’s value.  As there were no other insureds, and the subsidiary did not purchase any reinsurance, the Tribunal also found that the risk had not been “distributed”.  Because there was no shift in the risk of loss away from the parent company, and the risk was not distributed, the Tribunal held the company’s premium payments to its wholly-owned, captive insurance subsidiary were not deductible for federal income tax purposes.  The taxpayer also argued that New York State tax deductions for insurance premiums paid to a captive insurance subsidiary may be inferred from New York’s captive insurance company laws, but the Tribunal didn’t bite.  The Taxpayer made several other arguments, which the Tribunal also dispensed with.  Ultimately, the Tribunal held the Division properly disallowed the deductions for the premiums paid by the parent.

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