The New York Division of Tax Appeals recently ruled in favor of a taxpayer, E. & J. Gallo Winery, holding that it met the statutory requirements of a âQualified New York Manufacturerâ (âQNYMâ) and was therefore entitled to a reduced corporation franchise tax rate. As a result of New Yorkâs corporate tax reform, QNYMs are entitled to a reduced tax rate, including a 0% tax rate on their business income base beginning in 2014, for…
On the heels of its loss in Matter of TransCanada Facility USA, Inc. DTA NO. 827332, on May 14, the New York State Department of Taxation and Finance proposed draft regulations addressing the Article 9-A Franchise Tax treatment of Qualified New York Manufacturers (âQNYMsâ).[1] These draft regulations, which are not currently in effect but which do shed light on the Departmentâs current thinking, amplify a position that the Department has taken in prior informal guidance and on audit regarding contract manufacturing arrangements and the scope of activities that constitute âmanufacturingâ that is not in the statute. The position that a taxpayer that engages in contract manufacturing cannot qualify as a QNYM is contrary to prior New York authorities addressing âmanufacturingâ in the investment tax credit context and contrary to judicial authorities defining âmanufacturingâ under relevant federal tax law. In addition, the draft regulations set out a new positionâagain, one not found in the statuteâthat âdigital manufacturingâ is not manufacturing, and that only manufacturing that results in the production of âtangibleâ goods will qualify for QNYM treatment.