New York City broker dealer apportionment | KPMG | GLOBAL
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New York City: Eligibility for broker-dealer apportionment is clarified

Eligibility for broker-dealer apportionment

The New York City Department of Finance issued an updated guidance memorandum addressing eligibility for broker-dealer receipts allocation. Under the New York City unincorporated business tax (UBT) and general corporation tax (GCT) measures, a securities or commodities broker-dealer is eligible to source certain receipts for apportionment purposes based on the mailing address of the customer responsible for paying the service fee—rather than sourcing such receipts from the fees based on where the taxpayer performed the services.


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Many taxpayers registered as broker-dealers with locations in New York benefit from the ability to source receipts based on the customer location. The updated memorandum addresses two issues:

  • Whether an entity may use the broker-dealer sourcing provisions if it is not a registered securities or commodities broker-dealer
  • Whether an entity may invoke the broker-dealer registration status of its single member limited liability company (which it owns and treats as a disregarded entity for tax purposes), in order to use the broker-dealer sourcing provisions for its own receipts/activities

With respect to the first issue, the memorandum appears to clarify that an entity must be registered with the Securities & Exchange Commission / Financial Industry Regulatory Authority or the Commodities Futures Trading Commission / National Futures Association in order to avail itself of the broker-dealer sourcing provisions. 

On the second issue, the memorandum provides that there is no basis for extending the application of the broker-dealer sourcing provisions to unregistered owners of registered single member limited liability companies, despite the tax treatment of such wholly owned companies as entities disregarded as separate from their owners. 

KPMG observation

It is understood that the Department of Finance’s new pronouncement regarding broker-dealer receipts allocation will be applied on audit examination to all open tax years. As such, taxpayers need to consider whether exposure now exists for prior tax years. Taxpayers also need to consider the memorandum on a prospective basis. Finally, while the same broker-dealer receipts allocation provisions have been in place for the New York State corporate franchise tax both before and now under corporate tax reform legislation, there are no official pronouncements from the New York State Department of Taxation and Finance addressing either of the two topics covered in the City’s memorandum. 


Read a December 2016 report [PDF 41 KB] prepared by KPMG’s State and Local Tax practice

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