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CT-244-I (8/99) ( back)

— its ratio of average aggregate debt to average aggregate equity for

If a sufficient portion of the target’s stock and/or assets is sold or

the tax year in which the acquisition occurred increases by more

otherwise disposed of within 18 months following the acquisition date,

than 100% over the ratio for the immediately preceding tax year,

subsidiary capital treatment of the target by the acquirer is denied in the

and

year of sale or disposition. The parent is required to include, in the

computation of its entire net income, interest and dividends received

— its ratio of average aggregate debt to average aggregate assets for

from the target corporation and gains from the sales of stock. In

the tax year in which the acquisition occurred increases by more

addition, entire net income must be increased by the amount of

than 60% over the ratio for the immediately preceding tax year, and

dividends excluded from the date of acquisition and prior to the first day

— the total of the acquiring person’s interest paid or accrued during

of the taxable year in which the disposition occurred. For example, if a

the tax year in which the acquisition occurred exceeds $1 million.

corporation acquired 3/31/98 is disposed 4/10/99, dividends received

Average aggregate debt for a given tax year is the sum of the average

for the period 3/31/98-12/31/98 must be added back. In both situations,

debt of the acquiring person and the average debt of the taxpayer

a 50% dividend deduction is not allowed. For asset disposition, loss of

(unless the taxpayer becomes a member of an affiliated group that

subsidiary capital treatment continues for 18 months following the

includes the acquiring person). In computing average aggregate debt,

disposition.

intercompany debt must be eliminated.

Part VI — Highly leveraged transaction modifications

Average aggregate equity for a given tax year is the sum of the average

equity of the acquiring person and the average equity of the taxpayer

Lines 29 through 36 — The interest expense add-back, net operating

(unless the taxpayer becomes a member of an affiliated group that

loss carry-forward denial, and investment tax credit recapture

includes the acquiring person). In computing average aggregate equity,

provisions may apply to highly leveraged transactions and are triggered

intercompany equity must be eliminated.

by changes in debt-to-asset and debt-to-equity ratios in the acquisition

year (see Part IV ).

Average aggregate assets for a given tax year is the sum of the

average assets of the acquiring person and the average assets of the

Line 30 — For the investment tax credit and research and development

taxpayer (unless the taxpayer becomes a member of an affiliated group

tax credit recapture provisions, the property is deemed to be disposed

that includes the acquiring person). In computing average aggregate

of on the day immediately preceding the transaction completion date.

assets, intercompany assets must be eliminated.

All other relevant provisions of Tax Law section 210.12(g) apply. The

In a highly leveraged corporate merger or corporate consolidation, the

recaptured amount must be added to the tax computed on the target

taxpayer is the surviving or consolidated corporation and:

corporation’s franchise tax report for the tax period prior to the

transaction.

— its ratio of average aggregate debt to average aggregate equity, for

the tax year in which the merger or consolidation occurred,

Lines 31 through 36 — Up to 5% of the total interest expense of the

increases by more than 100% over such ratio for the immediately

acquiring corporation or affiliated group may be required to be added

preceding tax year, and

back to entire net income. This interest recapture is required for any

— its ratio of average aggregate debt to average aggregate assets, for

year in which certain interest was deducted from entire net income and

the tax year in which the merger or consolidation occurred,

the taxpayer met the requirements of section 208.9(b)(6-a) during the

increases by more than 60% over such ratio for the immediately

taxable year, or within the three immediately preceding taxable years.

preceding tax year, and

Line 31 — Cost of target includes total costs incurred:

— total interest paid or accrued by the surviving or consolidated

— in a stock acquisition, the taxpayer’s total cost of any target

corporation during its tax year in which the merger or consolidation

corporation or corporations acquired in an acquisition year or during

occurred exceeds $1 million.

the three immediately preceding tax years;

Average aggregate debt for a given tax year is the sum of:

— in an asset acquisition, the value of assets acquired during an

— the average debt of the surviving or consolidated corporation; plus

acquisition year or in the three immediately preceding tax years;

— the average debt of the constituents. In computing average

and

aggregate debt, intercompany debt must be eliminated.

— in a corporate merger or consolidation, the total business,

Average aggregate equity for a given tax year is the sum of:

investment and subsidiary capital of constituent corporations during

the tax year or in the three immediately preceding tax years.

— the average equity of the surviving or consolidated corporation; plus

Line 32 — Average debt of the acquirer includes the average

— the average equity of the constituents. In computing average

(quarterly or more frequent) debt of the taxpayer plus the average debt

aggregate equity, intercompany equity must be eliminated.

of the target corporation, unless the target corporation becomes a

Average aggregate assets for a given tax year is the sum of:

member of an affiliated group that includes the taxpayer. All

— the average assets of the surviving or consolidated corporation;

intercompany debt must be eliminated in the computation.

plus

Line 34 — Total interest expense includes interest paid or accrued by

— the average assets of the constituents. In computing average

the taxpayer during the tax year, to the extent deducted in the

aggregate assets, intercompany assets must be eliminated.

computation of entire net income (that is, net of any interest required to

be added back under other provisions of Article 9-A).

Lines 13 and 14 — If you answered No on either of these lines,

complete Part V only. If you answered Yes on both these lines,

complete Parts V and VI.

Need help?

Tax information: 1 800 972-1233

Part V — Subsidiary capital/income adjustments

Forms and publications: 1 800 462-8100

Valuation of assets — The valuation of assets being disposed of is

From outside the U.S. and outside Canada: (518) 485-6800

found in section 210.2 of the Tax Law and requires real property and

Fax-on-demand forms: 1 800 748-3676

marketable securities to be valued at fair market value and personal

Internet access:

property to be valued in accordance with generally accepted accounting

Hearing and speech impaired (telecommunications device for the

principles.

deaf (TDD) callers only): 1 800 634-2110

Privacy Notification

Fair market value is the price at which a willing buyer and a willing

seller would arrive, after negotiation for sale, if neither is acting under

The right of the Commissioner of Taxation and Finance and the Department of Taxation and

compulsion.

Finance to collect and maintain personal information, including mandatory disclosure of social

security numbers in the manner required by tax regulations, instructions, and forms, is found in

Lines 17 through 28 — In any acquisition, the acquirer is required to

Articles 8, 9, 9-A, 13, 19, 27, 32, 33, and 33-A of the Tax Law; and 42 USC 405(c)(2)(C)(i).

hold more than 50% of the target’s stock for at least 18 months after the

The Tax Department uses this information primarily to determine and administer corporate tax

acquisition date to retain subsidiary capital treatment for interest,

liabilities under the Tax Law, for certain tax refund offsets, and for any other purpose authorized by

law.

dividends and gains received from the target. Additionally, the target

cannot sell or otherwise dispose of 50% or more in value of its assets

Failure to provide the required information may subject you to civil or criminal penalties, or both,

held on the date of acquisition (exclusive of cash and assets disposed

under the Tax Law.

of in the regular course of the target’s business) within 18 months of the

This information is maintained by the Director of the Registration and Data Services Bureau, NYS

acquisition date.

Tax Department, Building 8 Room 924, W A Harriman Campus, Albany NY 12227; telephone

1 800 225-5829. From areas outside the U.S. and outside Canada, call (518) 485-6800.

Instructions For Form Ct-244 - Acquisition, Merger And Consolidation Information Report Page 2

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