New York Court of Appeals Denies Disney, IBM Franchise Tax Deductions for Foreign Affiliates Royalty Payments

The New York Court of Appeals affirmed the decisions of the Tax Appeals Tribunal denying tax deductions claimed by Disney and IBM for royalty payments received from foreign affiliates. Under New York’s tax law from 2003-2013, corporations paying franchise tax could deduct royalty income received from corporate affiliates that had already paid tax on that income through New York’s add-back requirement. Disney and IBM claimed deductions for royalty payments from foreign affiliates not subject to New York tax. The Court found the statute only allowed the deduction where the affiliate was subject to the add-back requirement, and because any burden ...