Perspectives

NYC ALJ permits non-NYC subsidiary to be excluded from combined group

Multistate tax alert | January 20, 2015

An Administrative Law Judge (the “ALJ”) from the New York City Tax Appeals Tribunal recently ruled in favor of Astoria Financial Corporation (“Astoria Financial”), dismissing claims brought by the New York City Department of Finance (the “Department”). The Department is appealing this ALJ decision to the New York City Tax Appeals Tribunal. Accordingly, the decision is not yet final.

​New York City combined Banking Corporation Tax

Overview

An Administrative Law Judge (the “ALJ”) from the New York City Tax Appeals Tribunal recently ruled in favor of Astoria Financial Corporation (“Astoria Financial”), dismissing claims brought by the New York City Department of Finance (the “Department”) that Astoria Financial should have included a certain non-taxpayer subsidiary in its New York City combined Banking Corporation Tax (“Bank Tax”) returns for the years 2006-2008.1 The Department is appealing this ALJ decision to the New York City Tax Appeals Tribunal. Accordingly, the decision is not yet final.2

In this Tax Alert we summarize this ALJ decision.

Background

Astoria Financial is the holding company parent of Astoria Federal Saving & Loan Association (“Astoria”); both are headquartered in Nassau County, New York. Astoria and several subsidiaries, including Fidata Service Corporation (“Fidata”), a Connecticut-based passive investment company (“PIC”), engage in the banking business. As a bank operating in New York City, Astoria, together with ten of its subsidiaries, filed New York City combined Bank Tax returns during the audit period (tax years ending December 31, 2006 through December 31, 2008). Astoria did not include Fidata in these combined Bank Tax returns. The Department assessed tax against Astoria Financial of approximately $9.4 million3 for the audit years, asserting three separate theories under which Fidata should have been included in Astoria Financial’s New York City Bank Tax returns during the audit period.

1 New York City Div. of Tax Appeals, TAT(H) 10-35(BT) (Oct. 29, 2014), which may be accessed at the following link: http://www.nyc.gov/html/tat/downloads/pdf/1035DET1014.pdf.

2 Note that ALJ determinations are not considered as precedent in the New York City Tax Appeals Tribunal or any New York State judicial proceeding. Charter of the City of New York, Ch. 7, Sec. 168.d. However, an ALJ’s reasoning and analysis may potentially suggest how that ALJ may address similar facts presented by another taxpayer.

3 The amount appears to include the impact of Astoria Financial including its subsidiary (Astoria Mortgage Corporation) in its combined returns as well. Astoria Financial did not object to this subsidiary being included, but continued to assert that the required combination was not appropriate.

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