Investment Tax Credit Denied in New York

The New York Tax Appeals Tribunal (TAT) has affirmed an administrative law judge's determination that the taxpayers, public utilities engaged in the distribution and sale of natural gas, were not eligible for the investment tax credit (ITC) under N.Y. Tax Law § 201(12) because their machinery and equipment they claimed in the credit tax base consisted primarily of pipes and mains used to distribute and deliver natural gas, and not for manufacturing or processing.


On appeal, the taxpayers argued that their entire integrated systems should qualify for the ITC because their systems were either production or processing systems, the transportation of goods during production did not disqualify assets otherwise used in production, and, viewed separately, each device involved in the processing of natural gas altered it in a way essential for consumer use. The TAT rejected the taxpayers' arguments and agreed with the Division, holding that the evidence showed that the taxpayers' integrated gas distribution system did not qualify for an ITC as their machinery, equipment, pipes, and mains were not principally used in either production or processing, but were, instead, used for the distribution and delivery of natural gas to customers. In the Matter of the Petition of The Brooklyn Union Gas Co., NYS Tax Appeals Tribunal.