United States

New York: Reminder - Investment Capital Must be Identified Before October 1, 2015

Sep 21, 2015
From KPMG TaxWatch

Transcript Only

In July 2015, the New York State Department of Taxation and Finance issued guidance outlining the identification requirements for Article 9-A taxpayers with investment capital, TSB-M-15(4)C, (5)I (July 7, 2015).  Recall, under New York’s corporate tax reform effective for tax years beginning on or after January 1, 2015, net investment income from qualifying investment capital is excluded from a taxpayer’s business income.  Likewise, investment capital (net of liabilities attributable to such investment capital) is excluded from a taxpayer’s business capital tax base.  Investment capital are those investments in stock of non-unitary corporations that satisfy a five-part test. To qualify, investments in non-unitary stock must 1) qualify as a “capital asset” under section 1221 of the Internal Revenue Code (IRC), 2) be held for investment for more than one year, 3) generate long term capital gain or loss under the IRC if disposed of, 4) for stock acquired on or after January 1, 2015, have never been held for sale to customers in the regular course of business, and 5) before the close of the day on which the stock was acquired, be clearly identified in the corporation’s records as stock held for investment in the same manner as required under IRC section 1236(a)(1) (the identification requirement is extended to seven days for certain floor specialists as defined in IRC section 1236(d)). 

The Department’s Technical Memorandum provides the procedures required to satisfy the identification requirement for investment capital for both dealers in stock and non-dealers. In most cases, stock or options currently held that may qualify as investment capital must be identified as such before October 1, 2015.  If a stock is not clearly identified as investment capital in the manner required, that stock will not qualify as investment capital. Taxpayers should also put procedures in place to properly identify stock acquired on or after October 1, 2015 as investment capital before the close of the day on which such stock was acquired.  Please contact Russ Levitt at 212-872-6717 with questions. 

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The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.