United States

New York: Court Upholds Tribunal Decision Holding that HMOs were included in New York City Combined Group

Nov 06, 2017
From KPMG TaxWatch

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Recently, the New York Supreme Court, Appellate Division, confirmed a decision of the New York City Tax Appeals Tribunal holding that Health Maintenance Organizations (HMOs) were subject to New York City general corporate tax for the tax years at issue. The court did not write its own decision, but merely adopted the Tribunal’s opinion. The issue in the case was fairly simple. The taxpayer argued that the HMO’s were exempt from general corporate tax because they were insurance companies doing an insurance business in New York. Thus, in the taxpayer’s view, the HMOs were excluded from the corporate parent’s combined group for the 2005 and 2006 tax years at issue and the taxpayer was entitled to a refund of city general corporate tax. The City asserted that the HMOs were not insurance companies and were subject to the general corporate tax.

The Tribunal concluded that the HMOs were not “doing an insurance business” in New York. Notably, the HMOs were regulated under the state’s Public Health Law, rather than the Insurance Code. The Tribunal observed that the HMO provisions in the Public Health Law were enacted to specifically prevent any conflation of HMOs with insurers. Furthermore, many provisions of the insurance law, in the Tribunal’s view, established that HMOs were not considered to be engaged in the insurance business. For example, certain provisions in the Insurance law would be unnecessary if HMOs were considered to be doing an insurance business. Please contact Hernan Stigliano at (212) 872-6967 with questions on Matter of Aetna, Inc. v. New York City Tax Appeals Trib.


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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.