New York Advisory Opinion TSB-A-13(3)C: Does a U.S. bank holding company stay taxed under Article 9-A (rather than Article 32) after a reorganization and the sale of its banking subsidiary, under the Gramm-Leach-Bliley transition rules?

Plain-English summary

An alien bank operates in the U.S. through a primary holding company (Holdco). Holdco was organized in December 2003, first registered as a bank holding company on December 22, 2003, and elected to be a financial holding company on December 29, 2003. Back in 2004 the Department confirmed Holdco could elect to be taxed under Article 9-A (general business corporation tax) and could not be forced into an Article 32 (bank tax) combined return. During the year ended October 31, 2011 Holdco acquired assets from affiliates in a reorganization, and on March 2, 2012 it sold its banking subsidiary and stopped being a bank holding company. Holdco asked whether it would keep filing under Article 9-A.

The Department said yes. Bank holding companies are classified as Article 9-A taxpayers under Tax Law § 1452(d), but are normally pulled into Article 32 by that article's combined-reporting rules. The Gramm-Leach-Bliley transition provision, Tax Law § 1462(f)(2)(iv)(B), says a bank holding company that first registers and elects financial-holding-company status on or after January 1, 2000 and before January 1, 2015 cannot be required to file an Article 32 combined return. Holdco fits, so it is taxed under Article 9-A. Even if the asset acquisition triggered the election-revocation circumstance in § 1452(n)(3)(E), the no-combination rule would still apply, leaving Holdco in Article 9-A. And because Holdco stopped being a bank holding company only after October 31, 2011, the § 1452(m)(1) transition keeps it in Article 9-A for the following year because it was properly an Article 9-A taxpayer the year before.

What this means for you

Bank and financial holding companies

The Gramm-Leach-Bliley transition rules created a durable Article 9-A classification for holding companies that registered and elected financial-holding status in the post-2000 window. That status is sticky: a mid-stream reorganization that shifts assets among affiliates, and even ceasing to be a bank holding company, do not by themselves flip you back to Article 32.

Accountants and tax professionals

Pin down two dates -- when the entity first registered as a bank holding company and when it elected financial-holding-company status -- because the transition relief in § 1462(f)(2)(iv)(B) turns on that January 1, 2000 to January 1, 2015 window. Watch § 1452(n)(3)(E) only as an election-revocation trigger; here it didn't matter because the no-combination rule overrode it. (Note: this opinion predates New York's 2014-2015 bank/corporate tax merger; check current law.)

Common questions

Q: Why isn't a bank holding company taxed under the bank tax (Article 32)?
A: The Gramm-Leach-Bliley transition rule (Tax Law § 1462(f)(2)(iv)(B)) bars forcing a holding company that registered and elected financial-holding status after January 1, 2000 into an Article 32 combined return, so the § 1452(d) Article 9-A classification controls.

Q: Did the reorganization change Holdco's tax article?
A: No. Even if the asset acquisition triggered § 1452(n)(3)(E), the no-combination rule still applied, so Holdco remained an Article 9-A corporation.

Q: What happens the year it stops being a bank holding company?
A: Section 1452(m)(1) keeps it in Article 9-A for that year because it was properly taxed as an Article 9-A taxpayer the prior year.

Citations and references

• Tax Law § 1452(d) (bank holding companies classified as Article 9-A taxpayers); Tax Law § 1452(j)(2) (election to be taxed under Article 9-A)
• Tax Law § 1462(f)(2)(iv)(B) (Gramm-Leach-Bliley transition; cannot be required to file Article 32 combined return)
• Tax Law § 1452(n)(3)(E) (asset acquisition that can revoke an election)
• Tax Law § 1452(m)(1) (transition for a corporation that ceases to be a bank holding company)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/corporation_ao_2013.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/corporation/a13_3c.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Counsel
Advisory Opinion Unit

TSB-A-13(3)C
Corporation Tax
February 28, 2013

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. C110114A

The Department of Taxation and Finance received a Petition for Advisory Opinion
from name and address redacted. The issue is whether Petitioner’s U.S. subsidiary, Holdco,
an Article 9-A taxpayer as a result of the Gramm-Leach-Bliley Act transitional provisions of
Article 32, will continue to be taxed under Article 9-A subsequent to the completion of a plan
of reorganization (hereinafter the “Reorganization Plan”). We conclude that Holdco will
continue to be taxed under Article 9-A of the Tax Law.
Facts
Petitioner is an alien bank doing business in the United States directly and through
various other legal entities that are engaged in numerous financial businesses, including
banking, broker-dealer, insurance and other financial services-related activities. The primary
U.S. holding company (“Holdco”) indirectly owned by Petitioner was formed on December 8,
2003 and registered for the first time as a bank holding company on December 22, 2003. 1
Holdco elected to be a financial holding company on December 29, 2003. Holdco is
exercising its corporate franchise and doing business in New York.
In 2003, the parent company of Holdco at the time requested and received an advisory
opinion from the New York State Department of Taxation and Finance confirming that
Holdco was entitled under Tax Law section 1452(j)(2) to elect to be taxed as an Article 9-A
taxpayer.2 Further, this advisory opinion concluded that the Department could not require
Holdco to file an Article 32 tax return on a combined basis pursuant to Tax Law section
1462(f)(2)(iv)(B). As a result, Holdco has historically filed general business corporation
franchise tax returns in New York under Article 9-A since its formation.
During the tax year ended October 31, 2011, Holdco and other entities within
Petitioner’s affiliated group initiated its Reorganization Plan whereby Holdco acquired certain
assets from other affiliated entities. As a result of such asset acquisitions, Holdco’s business
operations may be deemed to have changed from its business operations immediately prior to
the Reorganization Plan. Additionally, subsequent to the completion of the Reorganization
Plan, Holdco agreed to sell 100% of its ownership interest in its banking subsidiary
1

The term bank holding company, as used throughout this petition, is defined as set forth in the United States
Bank Holding Company Act of 1956.
2
See, RBC Holdings USA, Inc., TSB-A-04(1)C, Petition No. C031028A, February 26, 2004.

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TSB-A-13(3)C
Corporation Tax
February 28, 2013

(hereinafter the “Bank”). Holdco’s sale of the Bank closed on March 2, 2012, at which time
Holdco ceased to be a bank holding company.
Analysis
The issue presented by the Petitioner is whether Holdco will continue to be taxed
under Article 9-A subsequent to the completion of the Reorganization Plan.
Generally, while bank holding companies are classified as Article 9-A taxpayers under
Tax Law section 1452(d), they are subject to tax under Article 32 by virtue of the combined
reporting provisions of that article. However, one of the statutory components of the GrammLeach-Bliley transitional provisions, Tax Law section 1462(f)(2)(iv)(B), states that a bank
holding company which first registers as a bank holding company and elects to be a financial
holding company on or after January first, two thousand and before January first, two
thousand fifteen, cannot be required to be included in a combined return under Article 32. In
that instance, the classification stated in section 1452(d) applies and the bank holding
company is subject to tax under Article 9-A. As previously noted, Holdco was organized on
December 8, 2003, registered for the first time as a bank holding company on December 22,
2003 and subsequently elected to be a financial holding company on December 29, 2003.
Accordingly, because of its bank holding company and financial holding company status,
Holdco has been subject to taxation under Article 9-A pursuant to sections 1452(d) and
1462(f)(2)(iv)(B).
Under Petitioner’s Reorganization Plan, Holdco acquired certain assets from other
affiliated entities. This acquisition of assets might have triggered the circumstances set forth
under Tax Law section 1452(n)(3)(E).3 Subdivision (n) of section 1452 specifies certain
circumstances that, if they occur, would cause the revocation of an election of a corporation to
be taxed under Article 9-A or Article 32. In this type of instance, when an election is revoked,
the taxable status of the corporation would be determined under the remaining provisions of
Article 9-A and Article 32. Because the restriction on combined reporting that applies to those
bank holding companies that both first register as a bank holding company and then elect to
be a financial holding company after January 1, 2000 would apply to Holdco, even if the
requirements set forth in Tax Law section 1452(n)(3)(E) are triggered during the course of the
Restructuring Plan that occurred in the tax year ended October 31, 2011, Holdco would still
be classified as an Article 9-A corporation.

3

The circumstance described in Tax Law section 1453(n)(3)(E) is the acquisition by a corporation in a
transaction or series of related transactions of assets having an average value or, tax basis if greater, in excess of
40% of the average value or, tax basis if greater, in excess of all of the assets of the corporation immediately
prior to the acquisition and, as a result of such acquisition, the corporation is principally engaged in a business
that is different from the business immediately prior to the acquisition and that different business is described in
Tax Law section 1452(a)(9)(i), (ii) or (iii). We do not have sufficient facts to determine if the circumstances
described in Tax Law section 1453(n)(3)(E) occurred.

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TSB-A-13(3)C
Corporation Tax
February 28, 2013

Finally, because Holdco ceased to be a bank holding company after October 31, 2011
as a result of its sale of the Bank, it will continue to be taxed during its tax year ending
October 31, 2012 under Article 9-A pursuant to the Gramm-Leach-Bliley transition provision
applicable to that year, section 1452(m)(1), because it was properly taxed as an Article 9-A
taxpayer for its prior tax year ended October 31, 2011.

DATED: February 28, 2013

NOTE:

/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.