Charter Communications v. New York State Tax Appeals Tribunal, New York Supreme Court, Appellate Division, Case No. CV-25-0971
The New York Supreme Court, Appellate Division, held that corporate franchise taxpayers could not meet the definition of a “qualified emerging technology company” (“QETC”) unless every member of their combined group independently met the definition of a “QETC.” From 2012 to 2014, New York taxed QETCs at a reduced tax rate. A QETC includes a company located in New York whose primary products or services are classified as emerging technologies. A company is “located in New York” if it owns or rents real property in New York that is used for emerging technologies; a company’s emerging technologies are “primary” if they account for more than 50% of the company’s receipts.
The taxpayers in Charter were members of a combined group that collectively provided customers throughout the United States, including New York, with video, high-speed data, and digital-voice services. It was undisputed that the taxpayers’ combined group, when viewed in the aggregate, was “located in New York” and derived well over 50% of its total receipts from emerging technologies. Nevertheless, the court held that no taxpayer-member of the combined group could be a QETC unless every member of the combined group independently met the QETC requirements. Because certain members of the taxpayers’ combined group had no real property in New York, not every member of the combined group was a QETC, and therefore no taxpayer-member of the combined group was entitled to compute its tax at the reduced rate afforded to QETCs.