New York Advisory Opinion TSB-A-09(4)C: Is a corporation dissolved by proclamation that merely holds New York real property as a nominee still subject to Article 9-A franchise tax?

Plain-English summary

An officer of 24th Century Development Corp. asked about a corporation dissolved by proclamation on December 31, 1980 (under Tax Law section 203-a) that has been completely inactive ever since, yet still holds record title to a New York parcel (a day-care building). A separate company, MACP, actually operated the day-care business and paid all expenses; the dissolved corporation received no income, kept no books, and held no assets but the property. Does its continued ownership of the property subject it to Article 9-A franchise tax for the post-dissolution years?

The Department concluded it was subject to tax before but not after dissolution. Section 209.1 imposes the franchise tax on corporations doing business, employing capital, or owning/leasing property in New York. Section 209.3 says a dissolved corporation that continues to conduct business remains taxable -- but 20 NYCRR 1-2.4(c) provides that a dissolved corporation limited to liquidating its affairs is not taxable. Following a line of opinions (Li'l Cricket Marina, Perlinda Realty, etc.), a dissolved corporation that is merely a record title holder of New York real property as nominee for the benefit of others, and is otherwise inactive, is not conducting business under section 209.3. So the corporation owed franchise tax from its 1974 incorporation through its 1980 dissolution, but not for the years afterward.

What this means for you

Owners of dormant or dissolved corporations holding real estate

Holding bare legal title to New York property after a proclamation dissolution -- with no income, no operations, and no activity beyond being a nominee -- does not by itself revive franchise-tax liability. The pre-dissolution years remain taxable.

Accountants and tax professionals

The line is "conducting business" versus "merely holding title as nominee." Document the inactivity (no income, no bank account, no books, title held for others) to fit within 20 NYCRR 1-2.4(c) and the nominee line of authority under section 209.3.

Common questions

Q: Does owning New York real estate keep a dissolved corporation on the franchise-tax rolls?
A: Not if it merely holds record title as a nominee for others and is otherwise inactive -- that is not "doing business" under section 209.3.

Q: Were the pre-dissolution years taxable?
A: Yes. The corporation was subject to Article 9-A from incorporation through the date of its dissolution by proclamation.

Citations and references

• Tax Law § 209.1 (franchise tax on doing business / owning property); Tax Law § 209.3 (dissolved corporation that continues to do business)
• Tax Law § 203-a (dissolution by proclamation)
• 20 NYCRR 1-2.4(c) (dissolved corporation limited to liquidation is not taxable)
• Li'l Cricket Marina, TSB-A-02(15)C; Perlinda Realty, TSB-A-99(5)C

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/corporation_ao_2009.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/corporation/a09_4c.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-09(4)C
Corporation Tax
March 5, 2009

Office of Counsel
Advisory Opinion Unit
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. C080703A

A petition received July 3, 2008 from William F. Holden (“Petitioner”) raises the issue of whether a
corporation that was dissolved by proclamation over 20 years ago is subject to franchise tax under Article
9-A of the Tax Law. Specifically, Petitioner asks whether a corporation’s continued ownership of certain
real property in New York, notwithstanding its dissolution, subjects it to franchise tax for the years after
dissolution. We conclude that the corporation was subject to franchise tax before but not after its dissolution.
Facts
Petitioner is an officer of 24th Century Development Corp. (the “Company”), which was incorporated
in May, 1974 for the purpose of purchasing and developing a parcel of real property (the “Property”) for use
as a day-care center. A separate corporation, MACP, Inc. (“MACP”), was formed to operate and manage the
day-care business, which was a franchise of a national company.
After completion of construction, the Company played no role in the day-care business other than as
a record title holder of the Property. MACP operated the business and paid all expenses, including real estate
taxes, mortgage payments, and utilities. All income from the business is received directly from MACP and
no money is paid to the Company. The Company did not obtain a federal employer identification number
and did not file New York State franchise tax returns or pay franchise tax. On December 31, 1980, the
Company was dissolved by proclamation under Tax Law §203-a, and has been completely inactive since. It
has never received rental or other income and it has not maintained any bank account or kept books and
records since completion of the building. It has not owned any assets other than the Property.
Analysis
Section 209.1 of the Tax Law imposes an annual franchise tax on every corporation for the privilege
of exercising its corporate 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 that continues to conduct
business is 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 when the activities of a dissolved corporation are limited to
the liquidation of its business and affairs, the disposition of its 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.

TSB-A-09(4)C
Corporation Tax
March 5, 2009

-2-

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. Li’l Cricket Marina, Adv Op Comm
T&F, September 13, 2002, TSB-A-02(15)C; Perlinda Realty, Inc., Adv Op Comm T&F, January 29, 1999,
TSB-A-99(5)C; N.D.M.Autos, Inc., Adv Op Comm T&F, January 26, 1999, TSB-A-99(4)C; W.R.H.R.E.
Corp., Adv Op Comm T&F, March 3, 1995, TSB-A-95(4)C.
Accordingly, pursuant to section 209.1 of the Tax Law, Petitioner was subject to the franchise tax
imposed by Article 9-A for the taxable years during which Petitioner was incorporated beginning in May,
1974 through its dissolution by proclamation in December 1980. After its dissolution, Petitioner was merely
holding property as nominee for the benefit of others and is not conducting business in New York pursuant
to section 209.3 of the Tax Law. Therefore, Petitioner is not subject to tax under Article 9-A for taxable
years after it was dissolved by proclamation on December 31, 1980.

DATED: March 5, 2009

NOTE:

/S/
Jonathan Pessen
Director of Advisory Opinions
Office of Counsel

An Advisory Opinion is issued at the request of a person or entity. It is limited to the
facts set forth therein and is binding on the Department only with respect to the person
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Department policies in effect as of the date the Opinion is issued or for the specific
time period at issue in the Opinion.