1/2/2024 0 Comments Lookthrough nyc employees![]() ![]() The Department can be contacted via email at New York draft Reg. Taxpayers interested in or impacted by the draft regulation may provide feedback or comments to the Department by October 9, 2019. When considered in combination with market-based sourcing requirements for other states, including a recent California draft regulation sourcing receipts to the underlying investor 5, there is an inconsistency between the draft regulation and the approach taken by other states that look through to the location of the investor for corporate sourcing purposes (e.g., draft California regulations). It is recommended that investment managers (especially New York-based investment managers) review the terms of contracts with passive investment customers to analyze the impact of draft Reg. The terms of the contract between the investment manager and passive investment customer could play a significant role in determining New York sourcing of management fees. When Management Corp’s office is located in New York, the entire receipt will be included in the New York receipts factor. Under this fact pattern, New York looks to the location of Management Corp’s office. In example 12, Management Corp entered into a contract with Hedge Fund that provided "broad discretionary authority" to Management Corp to manage the funds and securities of Hedge Fund. Management Corp makes and utilizes the investment advisory and management decisions for Hedge Fund at Management Corp’s office located in New York therefore, the entire receipt is included in both New York receipts and everywhere receipts. The service provided by Management Corp is a management service provided to a passive investment customer, so Management Corp must use the rule for management services to passive investment customers to source this receipt to the location where Hedge Fund utilizes the investment advice to make investment decisions.īecause Hedge Fund has granted broad discretionary authority to Management Corp to manage funds and securities of Hedge Fund, it is presumed that the location where Hedge Fund receives the benefit is the location where Management Corp executes these investment advisory and management decisions. Management Corp is providing its services to an entity that is not an investment company as defined under Tax Law Section 210-A(5)(d) therefore, receipts from these services are sourced under the rules in this section. In addition, the contract authorizes Management Corp to have broad discretionary authority to manage funds and securities of Hedge Fund (including the authority to purchase, sell, and otherwise trade securities of Hedge Fund) in a manner consistent with the investment strategy of the fund. Management Corp enters into a contract with Hedge Fund to provide the fund with investment advisory services. Example 12 below provides insight into the sourcing for investment managers:Įxample 12: Management Corp, an investment management corporation, with an office located in New York, provides investment advisory services in exchange for a fee. The draft regulation includes numerous examples, many of which are highly fact-specific and complex. ![]() If the passive investment customer does not grant the investment manager broad discretionary authority, New York would continue to look to the location of the investor. The draft regulation does not currently provide a definition for (broad discretionary authority). The draft regulation further states that if the passive investment customer has granted (broad discretionary authority) to the investment manager to execute investment management decisions on behalf of the passive investment customer, New York will look to the location of the investment manager’s offices where investment management and advisory decisions are made. 4-2.18 released on July 3, 2019, an investment manager must source service and other business receipts to the location where the customer receives the benefit of the service. The draft regulation looks to the location of the investment manager for purposes of sourcing receipts if certain conditions are met. A subsequent draft issued in August of 2017 eliminated draft Reg. 4-2.12 that generally looked through to the location of the fund’s investors for the sourcing of receipts. The draft regulation reverses the Department’s original position reflected in draft regulations previously issued on September 28, 2016, which contained language in draft Reg. The department reverses position on market-based sourcing for certain investment managers
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