New York Advisory Opinion TSB-A-12(3)C: Will the Department respect an Empire Zone certificate transferred to a corporation after a stock purchase and name change, and when does its sales-tax benefit period end?

Plain-English summary

On September 11, 2011 an LLC holding company bought all of the petitioner's stock, becoming its parent. The petitioner had been certified as an Empire Zone (EZ) business effective May 18, 2010 but had not yet claimed any EZ benefits. After the acquisition the petitioner changed its name but continued to exist and kept using the same federal employer identification numbers. The Department of Economic Development (DED) intended to transfer the EZ certificate of eligibility to the petitioner to reflect the name change. The petitioner asked whether the Tax Department would respect that transferred certificate and, if so, when its sales-tax benefit period ends.

The Department said it will respect the certificate. Once DED certifies a business, the Tax Department accepts a copy of the certificate of eligibility (and a retention certificate, if required) as evidence the criteria are met -- so it will honor the certificate DED issues in the petitioner's name. For the sales and use tax benefit period: for businesses certified on or after April 1, 2009, the period is 120 consecutive months beginning the first day of the month after certification, excluding any month in a year right after a year the business failed the employment test (Tax Law § 14(a)(2)). Counting from the May 18, 2010 certification, the period began June 1, 2010 and ends May 30, 2020, provided the petitioner meets the employment test throughout.

What this means for you

This petitioner's certificate after its stock acquisition

The Tax Department said it would accept the Certificate of Eligibility issued by DED in this petitioner's name. The opinion did not decide that a stock purchase generally preserves Empire Zone certification; DED's certificate was the basis for the Tax Department's treatment.

Accountants and tax professionals

For this petitioner's sales-tax benefits, the opinion counts 120 months from the first day of the month after certification, subject to the employment-test carve-out. The petitioner remained the same corporation and kept its federal ID, but the Tax Department's holding was to respect DED's issued certificate.

Common questions

Q: Does a stock purchase and name change end the Empire Zone certificate? A: For this petitioner, the Tax Department said it would respect the certificate DED issued in its name. The opinion does not decide all stock-purchase cases.

Q: How long is the sales-tax benefit period?
A: 120 consecutive months from the first day of the month after certification -- here June 1, 2010 to May 30, 2020 (Tax Law § 14(a)(2)).

Q: What can shorten the benefit period?
A: Months in a taxable year immediately following a year in which the business failed the employment test do not count toward the period.

Citations and references

• Tax Law § 14(a)(2) (Empire Zone sales and use tax benefit period; 120 months)
• General Municipal Law § 959(a) (DED authority to certify under Article 18-B); Tax Law Articles 28 and 29 (sales and use tax)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/corporation_ao_2012.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/corporation/a12_3c.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-12(3)C
Corporation Tax
April 2, 2012

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

PETITION NO. C120320A

The Department of Taxation and Finance received a Petition for Advisory Opinion from name and address redacted. Petitioner asks whether the Department of Taxation and Finance (DTF) will respect the Empire Zone (EZ) Certificate of Eligibility transferred by the Department of Economic Development (DED) from a corporation acquired by the Petitioner’s parent to the Petitioner, and, if so, when will Petitioner’s sales tax benefit period end. We conclude that the Department will accept the Certificate of Eligibility transferred to Petitioner from the acquired business, as evidence that Petitioner is certified as an EZ business. Petitioner’s sales tax benefit period began on June 1, 2010 and ends on May 30, 2020. Facts On September 11, 2011, an LLC holding company (Parent) purchased all of the shares of stock of the Petitioner. With that purchase, the LLC holding company became Petitioner’s parent company. Prior to that acquisition, Petitioner operated under a different name. Following the acquisition of its stock by Parent, Petitioner’s name was changed, but the corporation continued to exist and use the same federal employer identification numbers that it had always used. Petitioner was certified as an EZ business, effective May 18, 2010 but did not claim any EZ tax benefits prior to its acquisition. DED intends to transfer the acquired company’s EZ Certificate of Eligibility to Petitioner to reflect the name change. Analysis The General Municipal Law authorizes the Commissioner of DED to certify a business enterprise as eligible to apply for EZ tax benefits.1 Once a business has been certified, it will be eligible for the EZ tax benefits if it meets the requirements under the Tax Law. DTF will accept a copy of the Certificate of Eligibility and a Retention Certificate (if required) as evidence that the certification criteria have been met. Thus, DTF will respect the EZ Certificate of Eligibility issued by DED in the name of Petitioner. For purposes of Articles 28 and 29 of the Tax Law, with regard to business enterprises certified pursuant to Article 18-B on or after April 1, 2009, the benefit period consists of 120 consecutive months beginning on the first day of the month next following the date of 1

§959(a) of the General Municipal Law.

-2-

TSB-A-12(3)C
Corporation Tax
April 2, 2012

certification, provided that such period shall not include any month falling within a taxable year immediately preceded by a taxable year with respect to which the business enterprise did not meet the employment test.2 Thus, Petitioner’s benefit period for purposes of the EZ sales and use tax benefit period began on June 1, 2010 and ends on May 30, 2020, provided that it meets the required employment test during that time.

DATED: April 2, 2012

NOTE:

2

/S/
DEBORAH R. LIEBMAN
Deputy 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 or entity to whom it is issued and only if the person or entity fully and accurately describes all relevant facts. An Advisory Opinion is based on the law, regulations, and Department policies in effect as of the date the Opinion is issued or for the specific time period at issue in the Opinion. The information provided in this document does not cover every situation and is not intended to replace the law or change its meaning.

§14(a)(2) of the Tax Law.