NY TSB-A-01(12)C Corporation Tax 2001-01-10

May a newly registered bank holding company that elects financial-holding-company status file a combined Article 32 return without the Commissioner's permission, and can the Commissioner force separate filing?

Short answer: It may file combined, and the Commissioner cannot force it apart. A bank holding company that during a taxable year beginning on/after Jan. 1, 2000 and before Jan. 1, 2001 (1) does business in New York, (2) registers for the first time under the federal Bank Holding Company Act, and (3) elects to be a financial holding company under section 1450(h) may, under section 1462(f)(2)(iv), make a combined Article 32 return -- with any 65%-or-more-owned banking corporation doing business in New York -- without the Commissioner's permission, and the Commissioner may not require it to file separately for that year.

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

McDermott, Will & Emery asked, on behalf of a bank holding company ("Taxpayer"), whether the Commissioner could force the company to file separately under Article 32 when it had elected to file a combined return under section 1462(f)(2)(iv) for a taxable year beginning on/after January 1, 2000 and before January 1, 2001. The Taxpayer, during that year, (i) does business in New York, (ii) registers for the first time under the federal Bank Holding Company Act, and (iii) elects to be a financial holding company under section 1450(h), and it elects to combine with one or more banking corporations of which it owns or controls 65% or more of the voting stock.

The Department held the Taxpayer may file combined without permission, and the Commissioner cannot require separate filing:

Section 1462(f)(2)(iv)(A) lets such a bank holding company make a combined return without seeking the Commissioner's permission with any 65%-or-more-owned banking corporation doing business in New York in a corporate or organized capacity.
Section 1462(f)(2)(iv)(B) provides that the Commissioner may not require such a company to file on a combined basis -- but read with (A), once the company elects to combine and meets the three conditions, the Commissioner cannot require it to be excluded and file separately for that year.
The three conditions: during the year the company (1) does business in New York, (2) registers for the first time under the federal Bank Holding Company Act, and (3) elects financial-holding-company status under section 1450(h).

What this means for you

A one-time election right for newly registered financial holding companies

The 2000 legislation (Chapter 63) gave a narrow class -- bank holding companies that first register and elect financial-holding status in the 2000 tax year -- the right to file a combined Article 32 return by election, without asking the Commissioner first.

The election runs both ways in the taxpayer's favor

Not only can the company combine without permission, the Commissioner cannot force it back to separate filing for that year. The choice belongs to the qualifying taxpayer.

Watch the 65% ownership and "doing business" tests

The combination reaches banking corporations the company owns or controls 65% or more (directly or indirectly), each of which must be doing business in New York in a corporate or organized capacity.

Common questions

Q: Does a newly registered financial holding company need permission to file combined?
A: No. If it meets the three conditions of section 1462(f)(2)(iv), it may elect to combine without the Commissioner's permission.

Q: Can the Commissioner force it to file separately?
A: No. Once it qualifies and elects to combine, the Commissioner cannot require separate filing for that year.

Q: Which affiliates can be included?
A: Banking corporations 65% or more owned or controlled (directly or indirectly) that are doing business in New York in a corporate or organized capacity.

Citations and references

Statutes, regulations, and authorities:
- Tax Law section 1462(f)(2)(iv) (combined return election for newly registered financial holding companies; added by Ch. 63, Laws of 2000)
- Tax Law section 1450(h) (definition of financial holding company)
- Federal Bank Holding Company Act of 1956, as amended, section 4(l)
- McDermott, Will & Emery, TSB-A-01(12)C (Jan. 10, 2001)

Source

Original ruling text

New York State Department of Taxation and Finance
Office of Tax Policy Analysis
Technical Services Division

TSB-A-01(12)C
Corporation Tax
January 10, 2001

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. C000914C

On September 14, 2000, a Petition for Advisory Opinion was received from McDermott, Will
& Emery, 50 Rockefeller Plaza, New York, New York 10020.
The issue raised by Petitioner, McDermott, Will & Emery, is whether the Commissioner of
Taxation and Finance can require a bank holding company to file its return on a separate basis under
Article 32 of the Tax Law, when the bank holding company elects to file a combined return for the
taxable year that begins on or after January 1, 2000 and before January 1, 2001, pursuant to section
1462(f)(2)(iv) of the Tax Law.
Petitioner submits the following facts as the basis for this Advisory Opinion.
A bank holding company (“Taxpayer”) is, or will be, during its taxable year that begins on
or after January 1, 2000 and before January 1, 2001 (i) exercising its corporate franchise or doing
business in New York State, (ii) registered for the first time under the Federal Bank Holding
Company Act, as amended, and (iii) electing to be a financial holding company, as that term is
defined by section 1450(h) of the Tax Law. The Taxpayer will elect to file a combined return for
the taxable year that begins on or after January 1, 2000 and before January 1, 2001, with one or more
banking corporations of which the Taxpayer owns or controls 65 percent or more of the voting stock,
directly or indirectly; and each such banking corporation is doing business in New York State in a
corporate or organized capacity.
Discussion
Section 1462(f)(2)(iv) of the Tax Law, as added by Chapter 63 of the Laws of 2000, provides
that:
(A) Notwithstanding any provision of this paragraph, any bank holding
company which during a taxable year beginning on or after January first, two
thousand and before January first, two thousand one (I) is exercising its corporate
franchise or doing business in the state, and (II) registers for the first time during such
taxable year under the federal bank holding company act, as amended, and also elects
to be a financial holding company, may make a return on a combined basis without
seeking the permission of the commissioner for such taxable year or for any
subsequent taxable year beginning on or after January first, two thousand and before
January first, two thousand one with any banking corporation sixty-five percent or
more of whose voting stock is owned or controlled, directly or indirectly, by such

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bank holding company, provided such banking corporation is exercising its corporate
franchise or doing business in the state in a corporate or organized capacity.
(B) Notwithstanding any provision of this paragraph, the commissioner may
not require a bank holding company which, during a taxable year beginning on or
after January first, two thousand and before January first, two thousand one, registers
for the first time during such taxable year under the federal bank holding company
act, as amended, and also elects to be a financial holding company, to make a return
on a combined basis for any taxable year beginning on or after January first, two
thousand and before January first, two thousand one with a banking corporation
sixty-five percent or more of whose voting stock is owned or controlled, directly or
indirectly, by such bank holding company.
Section 1450(h) of the Tax Law, as added by Chapter 63 of the Laws of 2000, defines a
“financial holding company” as “a corporation that, pursuant to subsection (l) of section 4 of the
federal bank holding company act of nineteen hundred fifty-six, as amended, has filed with the
federal reserve board a written declaration that the corporation elects to be a financial holding
company and whose election has not been found to be ineffective by the federal reserve board.”
Accordingly, if Taxpayer meets the three conditions of section 1462(f)(2)(iv) of the Tax Law
during a taxable year beginning on or after January 1, 2000 and before January 1, 2001, Taxpayer
may make a return on a combined basis without seeking the permission of the Commissioner of
Taxation and Finance for such taxable year or for any subsequent taxable year beginning on or after
January 1, 2000 and before January 1, 2001, with any banking corporation 65 percent or more of
whose voting stock is owned or controlled, directly or indirectly by Taxpayer, provided the banking
corporation is exercising its corporate franchise or doing business in New York State in a corporate
or organized capacity. The three conditions of section 1462(f)(2)(iv) that Taxpayer must meet during
a taxable year beginning on or after January 1, 2000 and before January 1, 2001, in order to make
a return on a combined basis for such taxable year without seeking permission are:
(1) Taxpayer, during the taxable year, exercises its corporate franchise or does
business in New York State,
(2) Taxpayer, during the taxable year, registers to be a bank holding company for the
first time under the Federal Bank Holding Company Act, as amended, and
(3) Taxpayer, during the taxable year, elects to be a financial holding company, as
defined under section 1450(h) of the Tax Law.
For the taxable year or years beginning on or after January 1, 2000 and before January 1,
2001, Taxpayer meets the three conditions of section 1462(f)(2)(iv) of the Tax Law and elects to file

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TSB-A-01(12)C
Corporation Tax
January 10, 2001

a return on a combined basis with a banking corporation that is exercising its corporate franchise or
is doing business in New York State and 65 percent or more of whose voting stock is owned or
controlled, directly or indirectly, by Taxpayer. In this situation, the Commissioner of Taxation and
Finance cannot require Taxpayer to be excluded from the combined return and file its tax return on
a separate basis for any taxable year or years beginning on or after January 1, 2000 and before
January 1, 2001.

DATED: January 10, 2001

NOTE:

/s/
Jonathan Pessen
Tax Regulations Specialist III
Technical Services Division

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