Magazine article The CPA Journal

New York Tax Tribunal Clarifies the Standards for Combined Reporting

Magazine article The CPA Journal

New York Tax Tribunal Clarifies the Standards for Combined Reporting

Article excerpt

A recent Division of Tax Appeals decision, Matter of the Petition of Standard Manufacturing Co., Inc., 1992 N.Y. Tax LEXIS 30, February 6, 1992, may resolve the controversy whether distortion is a separate requirement where New York attempts to compel the combination of a non-taxpayer with a taxpayer corporation. The combined reporting standards in New York include stock ownership, unitary business, and income distortion requirements. Distortion is presumed to exist where substantial intercorporate transactions exist. While this presumption may generally be rebutted by a taxpayer (see Matter of the Petition of Digital Equipment Corporation, TSB-H-85 (29)C, October 14, 1985), a line of New York Court of Appeals cases has deemed the distortion requirement to be irrelevant where New York attempts to compel a combination between a non-taxpayer and a taxpayer corporation (see Matter of Campbell Sales Co. v. State Tax Commission, 68 N.Y. 2d 617, June 3, 1986, and Matter of Wurlitzer Co. v. State Tax Commission, 35 N.Y. 2d 100, July 11, 1974).

Under Campbell Sales and Wurlitzer, New York could require a nontaxpayer to file a combined report with a taxpayer corporation if the stock ownership and unitary business requirements were met, and substantial intercorporate transactions existed between the companies (with no opportunity for the nontaxpayer to rebut the presumption of distortion). However, the recent determination in Standard Manufacturing explicitly disapproved of the analysis used in Campbell Sales and Wurlitzer. …

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