A New York State Administrative Law Judge has ruled in favor of a New York-based securities broker-dealer on multiple issues under the New York State corporate franchise tax. The judge held the Division of Taxation (the “Division”) was required to apply its discretionary authority to source the broker-dealer’s receipts from various income streams earned through institutional investors using U.S. Census Bureau data as a reasonable approximation of customer location. She also held that the broker-dealer was entitled to investment income treatment for interest income earned on cash collateral it provided in securities lending transactions for which it made a “cash election” to treat the resulting interest income as investment income on its New York State tax returns.
