NY TSB-A-00(12)C Corporation Tax 2000-04-24

Is a corporation subject to Article 9-A tax for the years it was active, and after it was dissolved by proclamation while merely holding property as nominee?

Short answer: It is taxable for its active years but not after dissolution. The corporation (JN Parkville Inc/Corp) is subject to the Article 9-A franchise tax under section 209.1 for the taxable years it was incorporated and doing business -- from its 1990 formation until it was dissolved by proclamation in 1994. After that dissolution it was inactive, and even if it holds property only as a nominee for the benefit of others, it is not conducting business under section 209.3 and is not subject to Article 9-A.

Disclaimer: This is an official New York State Department of Taxation and Finance Advisory Opinion (TSB-A), issued by the Office of Counsel at a taxpayer's request. It is limited to the facts set forth in it and binds the Department only with respect to the petitioner to whom it was issued, and only if that petitioner fully and accurately described all relevant facts; another taxpayer cannot rely on it. It reflects the law, regulations, and Department policy in effect when issued and may since have changed. Taxpayer-identifying details are redacted. New York State and local sales taxes are administered centrally by the Department. This summary is informational only and is not legal or tax advice. Consult a licensed New York tax professional about your specific situation.

About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked at the bottom of this page, or PDF in the sidebar) is the authoritative source for any reliance.

View original ruling (PDF)

Plain-English summary

Jeffrey Freund asked whether a dissolved corporation (JN Parkville Inc / JN Parkville Corp) is subject to the Article 9-A franchise tax. The corporation was formed in 1990, was dissolved by proclamation in 1994, and afterward was inactive -- possibly holding property as a nominee for the benefit of others.

The Department split the answer by period:

While incorporated (1990-1994): Under section 209.1, a domestic corporation is subject to the franchise tax for the taxable years it was incorporated and doing business. So the corporation is subject to Article 9-A from its 1990 formation until its 1994 dissolution by proclamation.
After dissolution (post-1994): The corporation was inactive, and even if it holds property as a nominee for others, it is not conducting business in New York under section 209.3. Therefore it is not subject to Article 9-A after the 1994 dissolution.

What this means for you

Incorporation itself carries the franchise tax while it lasts

A domestic corporation owes the Article 9-A franchise tax for the years it exists and operates -- here, 1990 through the 1994 dissolution. Existence plus doing business is enough.

Dissolution plus inactivity ends the tax -- even as a nominee

Once dissolved by proclamation and inactive, a corporation that holds property only as a nominee for others is not doing business under section 209.3, and the franchise-tax obligation ends.

A two-period analysis

The opinion shows the importance of timing: tax applies for the active corporate life and stops at dissolution-plus-inactivity. (Compare TSB-A-00(3)C/Red Rose Farm, same dissolved-nominee conclusion.)

Common questions

Q: Is the corporation taxable for the years before dissolution?
A: Yes. It is subject to Article 9-A for the taxable years it was incorporated and doing business -- 1990 until its 1994 dissolution by proclamation.

Q: Is it taxable after dissolution?
A: No. Once dissolved and inactive, even holding property as a nominee, it is not doing business under section 209.3.

Q: Does holding property as a nominee count as doing business?
A: No -- not where the corporation is dissolved and otherwise inactive.

Citations and references

Statutes, regulations, and authorities:
- Tax Law section 209.1 (Article 9-A franchise tax; doing business while incorporated)
- Tax Law section 209.3 (corporation not doing business not subject to tax)
- Jeffrey Freund, TSB-A-00(12)C (Apr. 24, 2000)

Source

Original ruling text

New York State Department of Taxation and Finance

Office of Tax Policy Analysis
Technical Services Division

TSB-A-00(12)C
Corporation Tax
April 24, 2000

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. C000214B

On February 14, 2000, a Petition for Advisory Opinion was received from Jeffrey Freund,
430 Crown Street, Brooklyn, New York 11225.
The issue raised by Petitioner, Jeffrey Freund, is whether a dissolved corporation is subject
to franchise tax under Article 9-A of the Tax Law.
Petitioner submits the following facts as the basis for this Advisory Opinion.
Petitioner states that he set up a corporation, named JN Parkville Inc or JN Parkville Corp,
in 1990. For purposes of this advisory opinion, it is assumed that the corporation was incorporated
in New York State. Petitioner hoped to use it as a small business corporation (Sub Chapter S).
However, following the advice of his accountant at the time, Petitioner did not use the corporation.
Since 1990, Petitioner has reported all business income in his own name, not under the corporation
name. Petitioner states that he has filed his personal tax returns including such income as rental
income on Federal Form 1040 Schedule E, Part l – Income of Loss From Rental Real Estate and
Royalties.
Petitioner states that the corporation has never functioned, and Petitioner’s business has not
been conducted in the corporate name. The corporation was dissolved by proclamation in 1994. No
franchise tax returns were ever filed for the corporation.
Discussion
Section 209.1 of the Tax Law imposes, annually, a franchise tax on every corporation for the
privilege of exercising its franchise, or of doing business, or of employing capital, or of owning or
leasing property in New York State in a corporate or organized capacity, or of maintaining an office
in New York State for all or any part of each of its fiscal or calendar years.
Section 2-3.1 of the Business Corporation Franchise Tax Regulations provides that every
domestic corporation is required to pay a tax measured by entire net income (or other applicable
basis) up to the date on which it ceases to possess a franchise.
Section 209.3 of the Tax Law provides that a dissolved corporation which continues to
conduct business shall be subject to tax under Article 9-A of the Tax Law. Section 1-2.4(c) of the
Business Corporation Franchise Tax Regulations provides further that where the activities of a
dissolved corporation are limited to the liquidation of its business and affairs, the disposition of its

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TSB-A-00(12)C
Corporation Tax
April 24, 2000

assets (other than in the regular course of business), and the distribution of the proceeds, the
dissolved corporation is not subject to tax under Article 9-A.
Therefore, a dissolved corporation that is merely a record title holder of real property located
in New York State as nominee for the benefit of others, and is otherwise inactive, is not conducting
business in New York State as contemplated by section 209.3 of the Tax Law. N.D.M. Autos, Inc.,
Adv Op Comm T & F, January 26, 1999, TSB-A-99(4)C; Rubin Brothers Holding Company, Adv
Op Comm T & F, December 4, 1997, TSB-A-97(27)C; W.R.H.R.E Corp., Adv Op Comm T & F,
March 3, 1995, TSB-A-95(4)C; Highmount Medical Building Inc., Adv Op Comm T & F, May 7,
1991, TSB-A-91(12)C; Harold S. Sommers, Adv Op Comm T & F, March 15, 1990, TSB-A-90(9)C;
Babson Bros. Co. of New York Inc., Adv Op Comm T & F, September 1, 1988, TSB-A-88(19)C.
Accordingly, pursuant to section 209.1 of the Tax Law, Petitioner’s corporation, JN Parkville
Inc or JN Parkville Corp, is subject to the franchise tax imposed by Article 9-A for the taxable years
during which the corporation was incorporated, that is, from the time it was set up in 1990 until it
was dissolved by proclamation in 1994.
From the facts presented, it cannot be determined whether the corporation is a record title
holder of real property located in New York State. However, after its dissolution the corporation was
inactive, and even if it does hold property as nominee for the benefit of others, it is not conducting
business in New York State pursuant to section 209.3 of the Tax Law. Therefore, Petitioner is not
subject to tax under Article 9-A of the Tax Law after it was dissolved by proclamation in 1994.

DATED: April 24, 2000

NOTE:

/s/
John W. Bartlett
Deputy Director
Technical Services Division

The opinions expressed in Advisory Opinions are
limited to the facts set forth therein.