What is the Definition of a Subsidiary in New York?
Under NY tax laws, a subsidiary is defined as a corporation in which the taxpayer owns over 50 percent of the voting shares (Tax Law § 1450[d]; Administrative Code § 11-602).
Please see the following NY statutes:
§ 1450 Tax. General definitions.
As used in this article:
(a) The word "taxpayer" means a corporation or association subject to a
tax imposed by this article.
(b) The phrase "taxable year" means the taxpayer's taxable year for
federal income tax purposes, or the part thereof during which the taxpayer
is subject to the tax imposed by this article.
(c) The term "international banking facility" shall mean an international
banking facility located in New York state and shall have the same meaning
as is set forth in the New York state banking law or regulations of the New
York state banking department or as is set forth in the laws of the United
States or regulations of the board of governors of the federal reserve
(d) The term "subsidiary" means a corporation or association of which
over fifty percent of the number of shares of stock entitling the holders
thereof to vote for the election of directors or trustees is owned by the
(e) The term "subsidiary capital" means investments in the stock of
subsidiaries and any indebtedness from subsidiaries, exclusive of accounts
receivable acquired in the ordinary course of trade or business for
services rendered or for sales of property held primarily for sale to
customers, whether or not evidenced by written instrument, on which
interest is not claimed and deducted by the subsidiary for purposes of
taxation under article nine-A, thirty-two or thirty-three of this chapter,
provided, however, there shall be deducted from subsidiary capital any
liabilities payable by their terms on demand or within one year from the
date incurred, other than loans or advances outstanding for more than a
year as of any date during the year covered by the return, which are
attributable to subsidiary capital.
(f) The terms "New York S corporation", "New York S year", "New York S
election", "New York C corporation", "New York C year", "termination year",
"S short year", "C short year", and "New York S termination year" shall
have the same meaning as those terms have under subdivision one-A of
section two hundred eight of this chapter, except that references in such
subdivision to article nine-A of this chapter shall be read as references
to this article.
(g) The term "QSSS" means a corporation which is a qualified subchapter
S subsidiary as defined in subparagraph (B) of paragraph three of
subsection (b) of section thirteen hundred sixty-one of the internal
revenue code. The term "exempt QSSS" means a QSSS exempt from tax under
this article as provided in subsection (o) of section fourteen hundred
fifty-three of this article, or a QSSS described in clause (i) of
subparagraph (B) of paragraph two of subsection (o) of section fourteen
hundred fifty-three, wherein the parent corporation of the QSSS is
subject to tax under this article, and the assets, liabilities, income
and deductions of the QSSS are treated as the assets, liabilities, income
and deductions of the parent corporation. Where a QSSS is an exempt
QSSS, then for all purposes under this article:
(1) the assets, liabilities, income, deductions, property, payroll,
receipts, capital, credits, and all other tax attributes and elements of
economic activity of the QSSS shall be deemed to be those of the parent
(2) the stocks, bonds and other securities issued by, and any
indebtedness from, the QSSS shall not be subsidiary capital of the parent
(3) transactions between the parent corporation and the QSSS, including
the payment of interest and dividends, shall not be taken into account, and
(4) general executive officers of the QSSS shall be deemed to be general
executive officers of the parent corporation.
(h) The term "financial holding company" means a corporation that,
pursuant to subsection (l) of section 4 of the federal bank holding company
act of nineteen hundred fifty-six, as amended, has filed with the federal
reserve board a written declaration that the corporation elects to be a
financial holding company and whose election has not been found to be
ineffective by the federal reserve board.
(As amended by Laws 2000, ch. 63, Pt. HH, § 1, eff. May 15, 2000.)
Severability of Provisions: Laws 2000, ch. 63, § 2, provided that:
"If any clause, sentence, paragraph, subdivision, section or part
contained in any part of this act shall be adjudged by any court of
competent jurisdiction to be invalid, such judgment shall not affect,
impair, or invalidate the remainder thereof, but shall be confined in its
operation to the clause, sentence, paragraph, subdivision, section or part
contained in any part thereof directly involved in the controversy in
which such judgment shall have been rendered. It is hereby declared to be
the intent of the legislature that this act would have been enacted even
if such invalid provisions had not been included herein."
§ 905 Bus. Corp. Merger of parent and subsidiary corporations.
(a) Any domestic corporation owning at least ninety percent of the
outstanding shares of each class of another domestic corporation or
corporations may either merge such other corporation or corporations into
itself without the authorization of the shareholders of any such
corporation or merge itself and one or more of such other corporations into
one of such other corporations with the authorization of the parent
corporation's shareholders in accordance with paragraph (a) of section 903
(Authorization by shareholders). In either case, the board of such parent
corporation shall adopt a plan of merger, setting forth:
(1) The name of each corporation to be merged and the name of the
surviving corporation, and if the name of any of them has been changed, the
name under which it was formed.
(2) The designation and number of outstanding shares of each class of
each corporation to be merged and the number of such shares of each class,
if any, owned by the surviving corporation; and if the number of any such
shares is subject to change prior to the effective date of the merger, the
manner in which such change may occur.
(3) The terms and conditions of the proposed merger, including the manner
and basis of converting the shares of each subsidiary corporation to be
merged not owned by the parent corporation into shares, bonds or other
securities of the surviving corporation, or the cash or other consideration
to be paid or delivered in exchange for shares of each such subsidiary
corporation, or a combination thereof.
(4) If the parent corporation is not the surviving corporation, provision
for the pro rata issuance of shares of the surviving corporation to the
shareholders of the parent corporation on surrender of any certificates
(5) If the parent corporation is not the surviving corporation, a
statement of any amendments or changes in the certificate of incorporation
of the surviving corporation to be effected by the merger.
(6) Such other provisions with respect to the proposed merger as the
board considers necessary or desirable.
(b) If the surviving corporation is the parent corporation, a copy of
such plan of merger or an outline of the material features thereof shall be
given, personally or by mail, to all holders of shares of each subsidiary
corporation to be merged not owned by the parent corporation, unless the
giving of such copy or outline has been waived by such holders.
(c) A certificate of merger, entitled "Certificate of merger of .....
into ..... (names of corporations) under section 905 of the Business
Corporation Law", shall be signed and delivered to the department of state
by the surviving corporation. If the surviving corporation is the parent
corporation and such corporation does not own all shares of each subsidiary
corporation to be merged, such certificate shall be delivered not less than
thirty days after the giving of a copy or outline of the material features
of the plan of merger to shareholders of each such subsidiary corporation,
or at any time after the waiving thereof by the holders of all of the
outstanding shares of each such subsidiary corporation not owned by the
surviving corporation. The certificate shall set forth:
(1) The statements required by subparagraphs (a)(1), (2), (4) and (5) of
(2) The effective date of the merger if other than the date of filing of
the certificate of merger by the department of state.
(3) The date when the certificate of incorporation of each constituent
corporation was filed by the department of state.
(4) A statement that the plan of merger was adopted by the board of
directors of the parent corporation.
(5) If the surviving corporation is the parent corporation and such
corporation does not own all the shares of each subsidiary corporation to
be merged, either the date of the giving to holders of shares of each such
subsidiary corporation not owned by the surviving corporation of a copy of
the plan of merger or an outline of the material features thereof, or a
statement that the giving of such copy or outline has been waived, if such
is the case.
(6) If the parent corporation is not the surviving corporation, a
statement that the proposed merger has been approved by the shareholders of
the parent corporation in accordance with paragraph (a) of section 903
(Authorization by shareholders).
(d) The surviving corporation shall thereafter cause a copy of such
certificate, certified by the department of state, to be filed in the
office of the clerk of each county in which the office of a constituent
corporation, other than the surviving corporation, is located, and in the
office of the official who is the recording officer of each county in this
state in which real property of a constituent corporation, other than the
surviving corporation, is situated.
(e) Paragraph (b) of section 903 (Authorization by shareholders) shall
apply to a merger under this section.
(f) The right of merger granted by this section to certain corporations
shall not preclude the exercise by such corporations of any other right of
merger or consolidation under this article.