August 18, 2010
New Filing Requirements for New York Resident Trusts Not Subject to Tax in New York
For tax years beginning on or after January 1, 2010, almost all New York resident trusts will now be required to file New York fiduciary income tax returns under the newly issued Statement of Department Policy from the New York State Department of Taxation and Finance (TSB-M-10(5)I).
Under New York State Tax Law, a resident trust is a trust that is:
- created under the Will of a New York domiciliary,
- irrevocable when funded by a New York domiciliary,
- revocable when funded by a New York domiciliary, if it has not later become irrevocable, OR
- revocable when created, but at the time it became irrevocable the person who funded it was a New York domiciliary.
New York State resident trusts are not subject to New York State income tax if:
- the trust has no New York source income,
- all of the real and tangible property in the trust is located outside New York, AND
- all of the trustees are domiciled outside of New York.
Previously, New York resident trusts did not have to file New York State income tax returns if they were not subject to New York State income taxes. Under the new rule, even if a New York resident trust is not subject to tax in New York, a New York return must be filed if the trust:
- is required to file a Federal income tax return OR
- has any New York taxable income.
Resident trusts that are not subject to tax but are required under the new rule to file Form IT-205, New York State Fiduciary Income Tax Return, will also be required to complete and attach new Form IT-205-C, New York State Resident Trust Nontaxable Certification, to Form IT-205.
The new rule applies to all newly created and existing New York trusts.
If you have any questions concerning this Tax Flash, please contact your Marcum Tax Professional.