Relates to the taxation of certain banking corporations

BILL NUMBER:S4890

Title of bill

An act to amend the tax law and the administrative code of the city of New York, in relation to the taxation of certain banking corporations

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 banks and other financial services firms 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 still 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 and if the firms exercised the expanded powers provided at the Federal level.

The provisions first enacted in 1985, as they relate to the taxation of commercial banks, have been effective in accomplishing their legislative goals. They have been extended many times without change. However, because these provisions have been extended, without change, for over 20 years, during that time some unintended consequences have occurred. Consequently, this extension is modeled to alleviate these unintended consequences, while still providing companies the certainty they need.

For the last decade, New York has been routinely extending, for two years at a time, provisions within New York's tax code to address the Federal Gramm Leach,-Bliley statute. A part of that bi-annual legislation requires that a company's tax status from 1999 (the year before Gramm-Leach-Bliley was enacted): "is and will continue to be" the company's tax status going forward.

Since then, however, some companies' status may have changed. For instance, companies previously 65% of more owned by a regulated bank may no longer be under such legal ownership and by extending Gramm-Leach-Bliley it statutorily locks in these companies now inappropriate classification as a bank. Ironically, if these provisions were allowed to sunset, such companies

would not need any clarification - they would automatically be appropriately classified as an Article 9-A corporation.

An important variable in a company's long-term planning and growth strategy is clarity and certainty in tax laws. This legislation very simply and directly clarifies, in law, that companies be taxed equitably and the same as competitors.

Prior legislative history

None.

Fiscal implications

None to State.

Effective date

Immediately, for taxable years starting on January 1, 2011.