“New York’s Department of Taxation Concludes ERISA Doesn’t Preempt New York State’s Tax on UBTI”

Technical Service Bulletin Follows Second Circuit’s Hattem Decision.
Following the May 23, 2006 decision of the Second Circuit Court of Appeals in Hattem v. Schwarzenegger (449 F.3d 423, 37 Employee Benefits Cas. 2436), holding that the Employee Retirement Income Security Act of 1974 (“ERISA”) does not preempt California’s tax on unrelated business taxable income (“UBTI”), the New York State Department of Taxation and Finance (the “Tax Department”) issued a Technical Service Bulletin (the “Bulletin”) stating that “an employee trust as described in section 401(a) of the Internal Revenue Code (IRC) is subject to New York State’s [tax on UBTI] imposed by Article 13 of the Tax Law if it is carrying on an unrelated trade or business in New York State.” 

This Stroock Special Bulletin discusses the Bulletin and its implications.