New York draft rules address sourcing certain management receipts

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July 2019

Overview

The New York State Department of Taxation and Finance (Department) on July 3 released amended draft regulations that provide guidance regarding the customer-based sourcing provisions of the state’s corporate franchise tax, effective for tax years beginning on or after January 1, 2015. The draft regulations address how asset management corporations should source their management or advisory fees.

Taxpayers should consider commenting on whether provisions of the draft regulations could be considered to exceed or conflict with statutory authority or have unintended ramifications. The Department is accepting comments on the draft regulations until October 9, 2019.

The takeaway

The draft regulation’s rule regarding the sourcing of management fees from passive investment customers  raises the question whether it would conflict with the statutory customer-sourcing provisions of Section 210-A, insofar as it would require certain taxpayers to source their asset management fees based on where they themselves are performing their management services.

The newly issued draft regulations are not binding until formally promulgated. The Department’s website specifically states that the draft regulations “are not final and should not be relied upon.” The Department is currently accepting comments on the draft regulations until October 9, 2019.

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Peter Michalowski

Peter Michalowski

State and Local Tax Leader, PwC US

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