NY TSB-A-99(4)C Corporation Tax 1999-01-26

Is a corporation dissolved by proclamation, which only holds record title to real property as nominee, subject to the Article 9-A franchise tax before and after its dissolution?

Short answer: It depends on the period. The corporation is subject to the Article 9-A franchise tax under section 209.1 for the taxable years it was incorporated, up to its dissolution by proclamation, because it held its corporate franchise and owned property in a corporate capacity -- even though it never actively conducted business. After dissolution, it is merely a record title holder of New York real property as nominee for others and is otherwise inactive, so under section 209.3 it is not conducting business and is not subject to the Article 9-A tax.

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

N.D.M. Autos, Inc. was a New York corporation that, after being dissolved by proclamation (in June 1988), continued only to hold record title to real property as a nominee. The corporation was formed in 1983 to sell cars, trucks or livestock but, after an owner became ill, never commenced any business; the owners' residence sat on the realty the corporation held, and the owners personally paid all the real estate taxes. It asked whether it is subject to the Article 9-A franchise tax.

The Department drew a two-period line:

While incorporated (before dissolution). Under section 209.1, the franchise tax applies for the privilege of exercising a corporate franchise, or owning or leasing property in a corporate capacity. So N.D.M. Autos, Inc. is subject to the Article 9-A franchise tax for the taxable years it was incorporated, up to its dissolution -- even though it never actively conducted business -- because it held its corporate franchise and owned property in a corporate capacity.
After dissolution. Under section 209.3 (and 20 NYCRR 1-2.4(c)), a dissolved corporation that is merely a record title holder of New York real property as nominee for others, and is otherwise inactive, is not conducting business. So after dissolution N.D.M. Autos, Inc. is not subject to the Article 9-A tax.

What this means for you

The corporate franchise itself is taxable

Before dissolution, simply holding the corporate franchise and owning property in a corporate capacity triggers the franchise tax, regardless of whether the corporation actively operated.

Dissolution plus bare nominee title ends the tax

Once dissolved, a corporation that does nothing but hold record title as nominee for others is not doing business under section 209.3 and owes no Article 9-A tax for that period.

This sits in the Department's dissolved-nominee line

The result follows a consistent line of opinions treating a dissolved, inactive record-title holder as not doing business.

Common questions

Q: Does the corporation owe franchise tax for the years before it was dissolved?
A: Yes. Holding the corporate franchise and owning property in a corporate capacity makes it subject to the tax for those years.

Q: Does it owe tax after dissolution?
A: No. As a dissolved, inactive nominee holding only record title, it is not doing business under section 209.3.

Q: Does never having actively operated change the pre-dissolution result?
A: No. The franchise and property ownership in a corporate capacity are enough for the pre-dissolution years.

Citations and references

Statutes, regulations, and authorities:
- Tax Law section 209.1 (Article 9-A franchise tax; privilege of exercising a corporate franchise; owning property)
- Tax Law section 209.3 (dissolved corporation not doing business not subject to tax)
- 20 NYCRR 1-2.4(c) (dissolved corporation limited to winding up not subject to tax)
- Rubin Brothers Holding Company, TSB-A-97(27)C (Dec. 4, 1997)
- N.D.M. Autos, Inc., TSB-A-99(4)C (Jan. 26, 1999)

Source

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-99(4)C
Corporation Tax
January 26, 1999

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. C981221B

On December 21, 1998, a Petition for Advisory Opinion was received from N.D.M. Autos,
Inc., Box 31, Katrine Lane, Lake Katrine, New York 12449.
The issue raised by Petitioner, N.D.M. Autos, Inc., is whether it is subject to franchise tax
under Article 9-A of the Tax Law subsequent to its dissolution by proclamation.
Petitioner submits the following facts as the basis for this Advisory Opinion.
Petitioner was a domestic corporation whose certificate of incorporation was filed on August
16, 1983. The sole officers, directors and stockholders are Norman Trahan and Mary Trahan,
husband and wife. At the time the certificate was filed, the said owners intended to engage in the
business of selling and trading cars and trucks or livestock or poultry. The realty was transferred
without consideration, by Norman Trahan and Mary Trahan, to Petitioner by deed dated November
22, 1983, and recorded in the Ulster County Clerk's Office on December 1, 1983.
Mr. Trahan became ill soon after Petitioner was formed. At age 66, he was diagnosed with
severe emphysema. Therefore, all plans to begin operation of the business were stopped. No
business ever commenced. Mr. Trahan progressively deteriorated until he now requires constant
oxygen.
Petitioner was dissolved by proclamation in June, 1988. Petitioner never conducted business
or exercised its franchise. No office was ever maintained at any time by Petitioner in New York or
elsewhere. The address given in the certificate of incorporation was the residence address of
Norman Trahan and Mary Trahan. Mr. and Mrs. Trahan lived in a house on the realty conveyed to
Petitioner.
Mr. and Mrs. Trahan paid from their personal funds all the realty taxes imposed on the realty
owned by Petitioner.
Discussion
Section 209.1 of the Tax Law imposes, annually, a franchise tax on every corporation for the
privilege of exercising its 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.

-2
TSB-A-99(4)C
Corporation Tax
January 26, 1999

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 which continues to
conduct business shall be 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 where 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.
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. Rubin Brothers
Holding Company, Adv Op Comm T & F, December 4, 1997, TSB-A-97(27)C; W.R.H.R.E Corp.,
Adv Op Comm T & F, March 3, 1995, TSB-A-95(4)C; Highmount Medical Building Inc., Adv Op
Comm T & F, May 7, 1991, TSB-A-91(12)C; Harold S. Sommers, Adv Op Comm T & F, March
15, 1990, TSB-A-90(9)C; Babson Bros. Co. of New York Inc., Adv Op Comm T & F, September
1, 1988, TSB-A-88(19)C.
Accordingly, pursuant to section 209.1 of the Tax Law, Petitioner is subject to the franchise
tax imposed by Article 9-A for the taxable years during which Petitioner was incorporated beginning
August 16, 1983 through its dissolution by proclamation in June 1988. After its dissolution,
Petitioner is merely holding property as nominee for the benefit of others and is not conducting
business in New York State pursuant to section 209.3 of the Tax Law. Therefore, Petitioner is not
subject to tax under Article 9-A of the Tax Law after it was dissolved by proclamation in June 1988.

DATED: January 26, 1999

NOTE:

/s/
John W. Bartlett
Deputy Director
Technical Services Bureau

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