New York: Guidance on identifying investment capital

New York: Guidance on identifying investment capital

A technical memorandum issued by the New York State Department of Taxation and Finance outlines the identification requirements for Article 9-A taxpayers with investment capital.


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Investment capital

Under New York’s recent corporate tax reform (effective for tax years beginning on or after 1 January 2015) net investment income from qualifying investment capital is excluded from a taxpayer’s business income.

Similarly, investment capital (net of liabilities attributable to such investment capital) is excluded from a taxpayer’s business capital tax base. “Investment capital” means those investments in stock of non-unitary corporations that satisfy a five-part test:

To qualify, investments in non-unitary stock must:

  • Qualify as a “capital asset” under IRC section 1221
  • Be held for investment for more than one year
  • Generate long-term capital gain or loss under the IRC if disposed of
  • For stock acquired on or after 1 January 2015, have never been held for sale to customers in the regular course of business,
  • 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 technical memorandum TSB-M-15(4)C, (5)I [PDF 639 KB] sets forth the procedures required to satisfy the identification requirement for investment capital.

Read a July 2015 report [PDF 48 KB] prepared by KPMG LLP.

KPMG observation

Corporations and partnerships that hold stock for investment need to consider the identification requirements and begin to implement procedures to comply with the requirements outlined in the memorandum. In most cases, stock or options currently held that may qualify as investment capital must be identified as such before October 1, 2015. Taxpayers also need to consider procedures that allow for proper identification of stock acquired on or after October 1, 2015, as investment capital before the close of the day on which such stock was acquired.

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