NY TSB-A-05(2)C / TSB-A-05(1)I Corporation Tax; Income Tax 2005-01-04

Does medical equipment used to perform Lasik eye surgery qualify for the New York investment tax credit?

Short answer: No. The investment tax credit under section 210.12 (Article 9-A) and section 606(a) (Article 22) requires property used in qualifying activities such as manufacturing or production of goods. A physician using Lasik machines (a Wavescan diagnostic device and an Excimer laser) is performing a medical service -- surgically reshaping the cornea -- not producing tangible goods for sale. So the equipment does not qualify, and the client may not claim the investment tax credit for it.

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

A physician performs Lasik -- laser surgery that reshapes the cornea to correct vision -- using a Marco 3D Wavescan (which maps the cornea) and a Wavelight Allegretto Excimer Laser (which reshapes it). The physician's accountant asked whether that equipment qualifies for the investment tax credit under section 210.12 (Article 9-A) and section 606(a) (Article 22).

The Department held it does not. The investment tax credit is for property used in qualifying activities such as manufacturing, processing, or production of goods. A surgeon performing Lasik is rendering a medical service -- altering the patient's eye -- not producing tangible goods held for sale. Citing Leisure Vue and General Mills Restaurant Group, the Department concluded the Lasik equipment is used to provide a service, so the physician may not claim the investment tax credit for the Wavescan or the Excimer laser.

What this means for you

The investment tax credit is for production, not services

New York's ITC rewards property used in manufacturing, processing, or producing goods -- not equipment used to deliver a service, however sophisticated or expensive. A medical procedure that alters a patient (Lasik) is a service, so the lasers and diagnostic machines do not qualify.

Service providers should not assume high-tech gear qualifies

Doctors, clinics, and other service businesses often buy costly, technical equipment. That alone does not make it ITC-eligible -- the test is the activity the property is used in, and providing a service fails it (Leisure Vue, General Mills Restaurant Group).

Same answer under both articles

The result is the same whether the practice is taxed under Article 9-A (section 210.12) or Article 22 (section 606(a)) -- the ITC definitions track each other, and a service use does not qualify under either.

Common questions

Q: Does Lasik surgical equipment qualify for New York's investment tax credit?
A: No. The surgeon provides a medical service, not the production of goods, so the equipment is not ITC-eligible.

Q: Why doesn't expensive medical technology qualify?
A: The ITC turns on the activity the property is used in -- manufacturing/processing/producing goods -- not on the cost or sophistication of the equipment. A service use fails the test.

Q: Is the answer different under the personal income tax?
A: No. The credit definitions under Article 22 (section 606(a)) and Article 9-A (section 210.12) track each other, and a service use does not qualify under either.

Citations and references

Statutes, regulations, and authorities:
- Tax Law section 210.12 (Article 9-A investment tax credit)
- Tax Law section 606(a) (Article 22 investment tax credit)
- Leisure Vue, Inc. v. Commissioner of Taxation and Finance, 172 AD2d 872
- Matter of General Mills Restaurant Group, Inc. v. Chu, 125 AD2d 762
- TSB-A-05(2)C / TSB-A-05(1)I (Jan. 4, 2005)

Source

Original ruling text

New York State Department of Taxation and Finance

Office of Tax Policy Analysis
Technical Services Division

TSB-A-05(2)C
Corporation Tax
TSB-A-05(1)I
Income Tax
January 4, 2005

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. Z040805A

On August 5, 2004, a Petition for Advisory Opinion was received from Reminick Aarons
& Co., LLP, 1430 Broadway, 17th Floor, New York, New York 10018.
The issue raised by Petitioner, Reminick Aarons & Co., LLP, is whether medical
equipment purchased to perform Lasik qualifies for the investment tax credit under section
606(a) of Article 22 of the Tax Law and section 210.12 of Article 9-A of the Tax Law.
Petitioner submits the following facts as the basis for this Advisory Opinion.
Petitioner’s client (Client) is a physician that performs Lasik. Lasik is a surgical
procedure involving the use of laser beams to reshape the cornea of the human eye. Patients
undergo the procedure because they have medical problems seeing clearly without eyeglasses or
contact lenses.
The most common problems are nearsightedness, farsightedness and
astigmatism.
The machines used in this procedure involve a “Marco 3D Wavescan” and a “Wavelight
Allegretto Excimer Laser.” The Wavescan is used to determine the contour of the human
cornea, the refractive prescription of the human eye and the total optical aberrations of the
human eye. This information is then used to determine what is entered into the Excimer laser’s
computer. The Excimer laser is then used to reshape the cornea.
After the procedure is performed, the patient will be permanently free from wearing
corrective lenses since the patient’s corneas will be materially altered. Although the eye itself
does not appear to have changed, the medical condition of the eye has changed substantially.
Applicable law and regulations
Section 210.12 of the Tax Law provides an investment tax credit for corporations under
Article 9-A of the Tax Law, and provides, in part:
(a) A taxpayer shall be allowed a credit, to be computed as hereinafter provided, against
the tax imposed by this article. The amount of the credit shall be the per cent provided
for hereinbelow of the investment credit base. The investment credit base is the cost or
other basis for federal income tax purposes of tangible personal property and other
tangible property … described in paragraph (b) of this subdivision, less the amount of the

-2TSB-A-05(2)C
Corporation Tax
TSB-A-05(1)I
Income Tax
January 4, 2005

nonqualified nonrecourse financing with respect to such property to the extent such
financing would be excludible from the credit base pursuant to section 46(c)(8) of the
internal revenue code ….
*

(b)(i) A credit shall be allowed under this subdivision with respect to tangible personal
property and other tangible property … which are: depreciable pursuant to section one
hundred sixty-seven of the internal revenue code, have a useful life of four years or more,
are acquired by purchase as defined in section one hundred seventy-nine (d) of the
internal revenue code, have a situs in this state and are (A) principally used by the
taxpayer in the production of goods by manufacturing, processing, assembling, refining,
mining, extracting, farming, agriculture, horticulture, floriculture, viticulture or
commercial fishing, (B) industrial waste treatment facilities or air pollution control
facilities, used in the taxpayer’s trade or business, (C) research and development
property, (D) principally used in the ordinary course of the taxpayer’s trade or business as
a broker or dealer in connection with the purchase or sale … of stocks, bonds or other
securities as defined in section four hundred seventy-five (c)(2) of the Internal Revenue
Code, or of commodities as defined in section four hundred seventy-five (e) of the
Internal Revenue Code, (E) principally used in the ordinary course of the taxpayer’s trade
or business of providing investment advisory services for a regulated investment
company as defined in section eight hundred fifty-one of the Internal Revenue Code, or
lending, loan arrangement or loan origination service to customers in connection with the
purchase or sale … of securities as defined in section four hundred seventy-five (c)(2) of
the Internal Revenue Code, or (F) principally used in the ordinary course of the
taxpayer’s business as an exchange registered as a national securities exchange ….
Section 606(a) of the Tax Law provides an investment tax credit for taxpayers under
Article 22 of the Tax Law, and provides, in part:
(1) A taxpayer shall be allowed a credit, to be computed as hereinafter provided, against
the tax imposed by this article. The amount of the credit shall be the per cent provided
for hereinbelow of the investment credit base. The investment credit base is the cost or
other basis, for federal income tax purposes, of tangible personal property and other
tangible property … described in paragraph two of this subsection, less the amount of the
nonqualified nonrecourse financing with respect to such property to the extent such
financing would be excludible from the credit base pursuant to section 46(c)(8) of the
internal revenue code.…
*

-3TSB-A-05(2)C
Corporation Tax
TSB-A-05(1)I
Income Tax
January 4, 2005

(2)(A) A credit shall be allowed under this subsection with respect to tangible personal
property and other tangible property … which are: depreciable pursuant to section one
hundred sixty-seven of the internal revenue code, have a useful life of four years or more,
are acquired by purchase as defined in section one hundred seventy-nine (d) of the
internal revenue code, have a situs in this state and are (i) principally used by the
taxpayer in the production of goods by manufacturing, processing, assembling, refining,
mining, extracting, farming, agriculture, horticulture, floriculture, viticulture or
commercial fishing, (ii) industrial waste treatment facilities or air pollution control
facilities, used in the taxpayer’s trade or business, (iii) research and development
property, (iv) principally used in the ordinary course of the taxpayer’s trade or business
as a broker or dealer in connection with the purchase or sale … of stocks, bonds or other
securities as defined in section four hundred seventy-five (c)(2) of the Internal Revenue
Code, or of commodities as defined in section 475(e) of the Internal Revenue Code, or
(v) principally used in the ordinary course of the taxpayer’s trade or business of providing
investment advisory services for a regulated investment company as defined in section
eight hundred fifty-one of the Internal Revenue Code, or lending, loan arrangement or
loan origination services to customers in connection with the purchase or sale … of
securities as defined in section four hundred seventy-five (c)(2) of the Internal Revenue
Code....
Opinion
In this case, Client is a physician that performs Lasik on the human eye. While Lasik is a
medical procedure that uses laser beams to reshape the cornea of the human eye, the procedure
does not constitute the production of goods, and it does not constitute any of the other qualifying
uses as contemplated in sections 210.12(b)(i) and 606(a)(2)(A) of the Tax Law. (see Matter of
Leisure Vue, Inc. v Comm T&F, 172 AD2d 872; Matter of General Mills Restaurant Group, Inc.
v Chu, 125 AD2d 762) Accordingly, Client may not claim an investment tax credit under
sections 210.12 and 606(a) of the Tax Law for a “Marco 3D Wavescan” and “Wavelight
Allegretto Excimer Laser” used in performing Lasik.

DATED: January 4, 2005

NOTE:

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

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