New York City Tribunal Rejects City’s Attempt To Forcibly Combine Bank And Its Mortgage Subsidiary -

The New York City Tax Appeals Tribunal, affirming a determination of the Chief Administrative Law Judge, has held that Astoria Bank, which engaged in a banking business in New York City, was not required to include in its combined New York City bank tax returns its Connecticut investment subsidiary that principally held non-New York mortgage loans. Matter of Astoria Financial Corporation & Affiliates, TAT (E) 10-35 (BT) et al. (N.Y.C. Tax App. Trib., May 19, 2016).

Under the former New York City bank tax law, a nontaxpayer subsidiary of a taxpayer bank or bank holding company cannot be included in a combined bank tax return unless it is necessary “to properly reflect the [bank tax] liability . . . because of intercompany transactions or some agreement, understanding, arrangement or transaction . . . .” Admin. Code § 11-646(f)(2)(i). In Astoria Financial, the mortgage investment subsidiary that the Department of Finance sought to combine was not itself subject to bank tax. The subsidiary conducted its activities from its office in Connecticut and qualified as a Connecticut “passive investment company” under the Connecticut tax law.