BILL NUMBER:  S4771A

 TITLE OF BILL :

An act to amend the tax law, in relation to exempting from the
definition of business capital, for the purposes of the franchise tax
on business corporations, the stock of a unitary insurance company,
the dividends from which are (or would be) exempt unitary dividends

 PURPOSE :

To clarify that, for the purposes of the franchise tax on business
corporations, business capital of a holding company taxed under
Article 9-A does not include the stock of a unitary insurance company,
the dividends from which are (or would be) exempt unitary dividends

 SUMMARY OF PROVISIONS :

Section 1 of the bill would amend section 208 (7)(a) of the Tax Law to
clarify that capital that could produce "exempt unitary corporation
dividends" is exempt from inclusion as business capital of the Article
9-A holding company

Section 2 is the effective date.

 JUSTIFICATION :
              

The recent tax reform set forth in the 2014-2015 enacted State Budget
eliminated the subsidiary capital rules, unintentionally creating
double taxation at the state level of business capital for Article 9-A
United States holding companies owning stock of a unitary insurance
company. The holding company's shares in the unitary insurance company
are now taxed as business capital of the holding company, and the
insurance company is then taxed again on its business income and
capital in its separate New York State tax return under Article 33 of
the Tax Law. Prior to 2015, the holding company's shares in the
unitary insurance company would have been excluded under the
subsidiary capital rules and not taxed as business capital of the
holding company.

This bill amends the definition of "business capital" to clarify that
if income from shares would be exempt dividend income to an Article
9-A holding company, the shares that could give rise to such exempt
dividend income are excluded from the holding company's business
capital. This change will eliminate the unintended consequences of the
tax reform set forth in the 2014-2015 enacted State Budget that, since
its enactment, has led to double taxation of business capital for
Article 9-A US holding companies owning stock of a unitary insurance
company. Prior to the enactment of the 2014-2015 State Budget, New
York law exempted the second level of taxation on subsidiary capital
held by the parent holding company.

 LEGISLATIVE HISTORY :

New bill.

 FISCAL IMPLICATIONS :

To be determined.

 EFFECTIVE DATE :
Immediately.