632-A - Personal Service Corporations and S Corporations Formed or Availed of to Avoid or Evade New York State Income Tax.

NY Tax L § 632-A (2019) (N/A)

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(b) Definitions for purposes of this section. (1) The term "personal service corporation" means a corporation whose principal activity is the performance of personal services and such services are substantially performed by the employee-owners of such corporation.

(2) The term "S corporation" means a corporation for which an election under section 1362 of the internal revenue code is in effect for such taxable year and whose principal activity is the performance of personal services and such services are substantially performed by the employee-owners of such corporation.

(3) The term "employee-owner" means any employee who owns, on any given day during the taxable year, more than ten percent of the outstanding stock of the personal service corporation or S corporation. For purposes of the preceding sentence, the constructive ownership of stock rules set forth in section 318 of the internal revenue code shall apply, except that "5 percent" shall be substituted for "50 percent" in section 318(a)(2)(C) of the internal revenue code.

(4) All related persons (within the meaning of section 144(a)(3) of the internal revenue code) shall be treated as one entity.

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