NY: Limited opportunity to withdraw from commonly-owned group election

The New York Department of Taxation and Finance recently issued TSB-M-18(1)C, which provides a procedure for withdrawing the commonly-owned group election made on a 2015 or 2016 Form CT-3-A, General Business Corporation Combined Franchise Tax Return. A similar notice, Finance Memorandum 18-3, was recently issued by the City Department of Finance.  Under New York State and City law, a group of commonly-owned or controlled corporations can elect to file a combined return including all the corporations that meet the ownership requirements for filing a combined return, regardless of whether the corporations are conducting a unitary business. This election is referred to as the commonly-owned group election.

Under the recently-released guidance, the opportunity to withdraw from the commonly-owned group election expires on June 1, 2018 and applies in the limited situation in which the designated agent of a combined group made a timely commonly-owned group election under the circumstances described in the State and City guidance on the combined group’s 2015 or 2016 return. In that specific situation only, the designated agent of the group can withdraw from the election, but only if all the corporations in the original combined group follow all the procedures required by June 1, 2018. Per the State and City guidance, they have been made aware that many taxpayers likely erroneously made the election because the corporations included in the combined group identically matched the corporations included in the federal consolidated return of the designated agent. This is directly contrary to the requirements for the commonly-owned group election that all corporations meeting the statutory ownership requirements must be included, whether or not those corporations are included in the same federal consolidated return. Please contact Russ Levitt at 212-872-6717 with questions.