New York's Rules on Subsidiary Capital Vs. Business Capital


The state of New York has a very lengthy and complex tax code, especially when it comes to corporations. Deductions can differ based on what is considered subsidiary capital and what is considered business capital. A subsidiary is a corporation that has more than half of its voting stock owned by the taxpayer (usually a parent corporation).

Subsidiary Capital

The New York State Department of Taxation and Finance defines subsidiary capital as investments in capital stock of subsidiary corporations and any liabilities with any subsidiary companies. The subsidiary capital tax rate is .09 percent, as of time of publication. There are some expenses that may be deductible under the subsidiary capital heading. Examples include interest paid when purchasing subsidiary capital; the salaries of employees who oversee subsidiaries; any legal expenses pertaining to the subsidiary; and any rent or housing costs that come from dealing with subsidiaries.

Business Capital

The department defines business capital as the fair market value of a corporation’s assets with liabilities and subsidiary capital deducted. The current tax rate on business capital is 1.5 percent. Some kinds of expenses can be deductible due to involvement with business capital. These deductible expenses include rent and office costs at production sites; shipping costs; and employee salaries.


Some expenses, however, may be partially one type of expense and partially the other. The New York tax rules state that if an expense is partially subsidiary capital and partially business capital, then a “reasonable method of apportionment” should be used to determine how much of the expense falls under what category. The New York tax department lends one example of office space on a floor: if one-fourth the space is business-related expenses, and three-fourths is subsidiary expenses, then the deductible nature should fall accordingly. However, costs that are 95 percent deductible under one category can be completely attributed to that category.

Tax Forms

Corporations in New York that have subsidiary capital must use primary tax form CT-3 or 3-A, cannot use CT-4, and must fill out Form CT-3-ATT Schedule C. Form CT-3-ATT Schedule C will help you calculate your subsidiary capital income and deductions. Corporations that have business capital but no subsidiary capital are free to use Form CT-3 or CT-4.

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