In This Issue:

- Tribunal Reverses ALJ and Permits Combination Based on Unitary Business and Distortion

- “Flat Sum Settlement” with IRS Held Not to Constitute Reportable Federal Change

- Tribunal Holds NYS Decoupling from Federal NOL Permissible

- Tribunal Upholds Tax on Tobacco Products but Strikes Fraud Penalties

- Insights in Brief

- Excerpt from Tribunal Reverses ALJ and Permits Combination Based on Unitary Business and Distortion:

Beginning in 2015, corporate tax reform has resulted in full unitary combination in New York State and City, which is intended to limit controversies over combination. However, for tax years beginning before 2015, there continues to be considerable controversy as to what taxpayers must show in order to achieve combination in the absence of substantial intercorporate transactions. A recent decision by the Tax Appeals Tribunal may turn out to be important precedent regarding combination, particularly for the ongoing unitary business standard for combination after corporate tax reform. Matter of SunGard Capital Corp. and Subsidiaries, et al., DTA Nos. 823631, et al. (N.Y.S. Tax App. Trib., May 19, 2015). In SunGard, the Tribunal, reversing an ALJ decision that rejected combination sought by the taxpayer, held that the taxpayer could file on a combined basis with certain affiliates based on a showing of a unitary business relationship and proof of actual distortion. The decision is also noteworthy inasmuch as, while unitary business determinations are particularly fact intensive, the taxpayer prevailed based on a stipulated evidentiary record, without witness testimony.

Facts. The SunGard group of corporations (“SunGard Group”) is engaged in providing information technology sales and services. It principally provides data processing and software services to the financial services industry, public sector entities, and colleges and universities, as well as other services for customers in various sectors of the economy.