The New York Times said the change could potentially save the financial services giant at least $3.5 million and perhaps several times that in annual city of New York taxes.
Scott Reif, a spokesman for the Senate Republicans, told the New York Times that the amendment was intended to correct a running flaw in the state’s tax code that for years has effectively stranded BlackRock in the wrong section of the code. “Our budget proposes a technical fix that will allow companies to avoid the unintended negative consequences of an otherwise good and necessary provision,” Reif told the newspaper.
According to the Times, BlackRock was once wholly owned by PNC Bank, but is now a stand-alone asset-management business partly owned by PNC and other companies. Normally that would make BlackRock subject to New York’s corporate franchise tax. Under a quirk in New York law, BlackRock continued to be treated as a bank for tax purposes, potentially subjecting it to a higher rate.
Last year, State Senator Liz Krueger and Assemblyman Jonathan Bing, both Manhattan Democrats, introduced legislation that would have allowed BlackRock to switch tax categories. The bill did not advance in the Senate, Krueger said, in part because she could never get the company’s lobbyists to explain how much they would save, or what steps they would take to offset any lost revenue to the city and state. “They were always vague about how much it would save them or what jobs they would bring” from offices elsewhere, she said.
Unless the change is enshrined in state law, officials said, BlackRock cannot take advantage of certain corporate tax cuts passed by New York City in recent years. One official, speaking on condition of anonymity, because he was not authorized to discuss the negotiations, said the city could expect to lose about $3.5 million in revenue next year, and several times that amount in the future.
BlackRock reported paying $971 million in local, state, federal and foreign taxes last year and calculated its effective tax rate at 33%, the Times said.