Relates to the Gramm-Leach-Bliley Act

BILL NUMBER:S8351

Title of bill

An act to amend the tax law and the administrative code of the city of New York, in relation to the federal Gramm-Leach-Bliley act

Purpose or general idea of bill

This bill extends for two additional years the provisions of the New York State and New York City bank taxes dealing with the taxation of commercial banks and the transitional provisions concerning the enactment and implementation of the Federal Gramm-Leach-Bliley Act (GLBA).

Summary of specific provisions

These provisions state, among other things, that a corporation required to be taxable, or electing to be taxable as a banking corporation under the transitional provisions shall continue to he taxable as such for those taxable years in which the corporation meets the definition of a banking corporation, or satisfies the requirements allowing it to elect to be taxed as a banking corporation.

Justification

Starting in 2000, transitional provisions relating to the Federal GLBA, which removed the prohibition against the affiliation of banks, securities firms and insurance companies, were added to both the Tax Law and the New York City Administrative Code. These transitional provisions were intended to provide banks and securities firms with some certainty about their taxable status under the New York, State and New York City taxes when the firms exercised the expanded powers provided at the Federal level.

The provisions first enacted in 1985, which relate to the taxation of commercial banks, have been effective in accomplishing their legislative goals. They have been extended many times without change. Therefore, it is appropriate to extend these provisions for an additional two years.

Without the transitional provisions relating to the Federal GLBA, businesses in the financial industry may encounter unexpected tax consequences or uncertainties concerning their tax status, because, in order to affiliate, the banking, securities and insurance industries must do so under the umbrella of a financial holding company. Since most financial holding companies are, by definition, bank holding companies, securities firms making the financial holding company election and their subsidiaries may unwittingly subject themselves to liability under the bank tax. This sudden reclassification of a company from a general business corporation taxpayer to a bank tax taxpayer may cause considerable administrative and compliance burdens. Companies whose financial subsidiaries expand

their activities may have a difficult time determining whether or not they should be classified as a taxpayer under the bank tax. Moreover, the ability of such companies to join in the filing of a combined report is left open to question. Thus, it is appropriate to extend the transitional relief for two additional years.

Prior legislative history

None.

Fiscal implications

None to State.

Effective date

Immediately.