Business corporation tax

For tax years beginning on or after January 1, 2015, a new corporate tax applies to corporations and banks, other than federal S-corporations, that do business in New York City. Starting in 2022, corporations that derive receipts of $1 million or more are also subject to tax. The new tax is being referred to as the business corporation tax.

Business corporation tax regulations

The Department of Finance (DOF) is in the process of developing regulations for the business corporation tax, enacted in 2015. On December 27, 2023, the New York State Department of Taxation and Finance published a new set of regulations for the New York State corporate tax. DOF’s new regulations will be substantially similar to the state’s, with several notable differences.

Public input

Thank you to those who attended the virtual information sessions and provided feedback.

You can still submit written comments regarding the differences between DOF’s proposed regulations and the state’s regulations, or any other matter related to DOF’s proposed regulations. We will review your feedback in the coming weeks and provide a written response to the questions we have received.

Below is a brief summary of the major areas in which DOF may depart from state policies. A more detailed description of the issues and a presentation are also available.

Allocation of flow-through income from partnerships

The Department of Finance is considering a departure from the allocation approach used by New York State for income that flows from a partnership to a corporate partner. Any items of income or gain from a partnership will be allocated under the statutory and regulatory rules of the unincorporated business tax (UBT) and will not be included in the receipts factor of a corporate partner. The corporation’s other income will be allocated under the business allocation percentage (BAP). The sum of the separately allocated partnership income and the business income allocated using the BAP will be the corporate partner’s taxable income for the purposes of the business corporation tax.

Clear and convincing evidence

The Department of Finance is considering departing from the evidentiary standards imposed by New York State that relate to determining the existence of a unitary business and overcoming presumptions related to certain allocation provisions. DOF does not intend to include language specifying the standard of evidence necessary to overcome presumptions and will continue making determinations based on the taxpayer’s individual circumstances.

Allocation of income from passive investment customers

The Department of Finance is considering adopting New York State’s regulations regarding the special allocation of income from passive investment customers, but proposes to replace the second allocation method (whereby the contract is managed by the passive investment customer) with a flat 8% allocation.

Billing address safe harbor

The Department of Finance proposes to increase the number of customers needed to meet the requirements of the billing address safe harbor beyond the threshold adopted by the state.

Real estate mortgage investment conduits

The Department of Finance proposes to retain the excess inclusion of a residual interest holder in a real estate mortgage investment conduit, which is required to be reported for federal income tax purposes, when calculating entire net income (ENI). This policy represents a departure from the New York State regulation that excludes the amount of excess inclusion from ENI.

Economic Nexus Standard Effective for 2022

For tax years beginning on or after January 1, 2022, the Administrative Code now provides that corporations deriving receipts of $1 million or more from New York City sources will be subject to the business corporation tax. A corporation with less than $1 million, but at least $10,000 of receipts from New York City sources, will also be subject to the business corporation tax if the corporation is part of a unitary group that, in the aggregate, derives receipts from New York City sources of $1 million or more. These threshold amounts may be adjusted annually to reflect changes in the Consumer Price Index.

For taxable years beginning on or after January 1, 2024:

The threshold at which a corporation and a unitary group are deemed to be deriving receipts from activity in New York City is:

When determining the threshold for a unitary group, only total the receipts from corporations conducting a unitary business that meet the ownership requirements with New York City receipts of at least:

Additionally, the existing economic nexus provisions for credit card issuers have been amended and expanded for 2022. Please see Finance Memorandum 22-3 and Administrative Code Section 11-653(1) for more on these changes.

Who has to pay this tax?

Corporations that do business, employ capital, or own or lease property, or maintain an office in the city in a corporate or organized capacity must pay this tax.

• The term corporations includes any entity that is taxable as a corporation for federal tax purposes, by election or otherwise, and so may include:
  • Limited Liability Companies
  • Joint stock companies or associations, and
  • Businesses conducted by trusts
  • Issued credit cards to 1,000 or more customers who have a NYC mailing address;
  • Has merchant customer contracts with 1,000 or more merchants located in the City to whom the corporation remitted payments for credit card transactions; or
  • The sum of its NYC credit card customers and NYC credit card merchants equals 1,000 or more

  Who is exempt from this tax?

  S-corporations are exempt from the Business Corporate Tax, but they are still subject to the General Corporation Tax or Banking Corporation Tax

  • Its activities are limited to investing or trading securities for its own account within the meaning of the federal safe-harbor contained in section 864(b)(2) of the Internal Revenue Code, or
  • It has not elected to be taxable as a domestic corporation and has no effectively connected income for federal income tax purposes.

  Tax bases and rates

  The tax applies to business income, however, business capital and gross receipts are alternative minimum tax bases

  Business Income Base Tax Rates
  

  Type of Business	Rate in Tax Year 2015 and thereafter
  Qualified manufacturing corporations	4.425%-8.85%
  Small businesses	6.5% - 8.85%
  Financial corporations	9%
  Remaining taxpayers	8.85%

  Qualified manufacturing corporations must meet certain property and receipts tests. For more information see here.

  Small businesses qualify depending on their level of income.

  Financial corporations are corporations, or combined groups that meet the definition set forth in Administrative Code section 11-654(1)(e)(1)(i).

  Business Capital Base Tax Rates

  • The maximum tax is $10 million.
  • A $10,000 reduction applies to all capital tax calculations (provided that the capital tax cannot be less than $0).

  Fixed Dollar Minimum (FDM) Amounts

  If New York City Receipts are:	Fixed Dollar Minimum Tax is:
  Not more than $100,000	$25
  More than $100,000 but not over $250,000	$75
  More than $250,000 but not over $500,000	$175
  More than $500,000 but not over $ 1 million	$500
  More than $1 million but not over $5 million	$1,500
  More than $5 million but not over $25 million	$3,500
  More than $25 million but not over $50 million	$5,000
  More than $50 million but not over $100 million	$10,000
  More than $100 million but not over $250 million	$20,000
  More than $250 million but not over $500 million	$50,000
  More than $500 million but not over $1 billion	$100,000
  More than $1 billion	$200,000

  Allocation of business income

  • A single receipts factor apportionment methodology is being phased-in on the same schedule as the current General Corporation Tax and will be fully effective for tax years beginning on or after January 1, 2018
  • Customer sourcing rules determine whether receipts are derived from activity within the City for purposes of the receipts factor
  • Small to mid-sized taxpayers will have a one-time election to continue using property and payroll to apportion income in tax years beginning on or after January 1, 2018
  • Receipts from services are generally sourced to the City if the customer receives the benefit of the service in the City
  • Current sourcing rules generally continue for:
    
    • Rentals of real and tangible personal property
    • Broker/dealer activities, except as described above
    • Credit card interest, fees, penalties, service charges, merchant discounts, and credit card fees;
    • Services provided to a Regulated Investment Company
    • Advertising

    Combined reporting

    • Domestic corporations and alien corporations, to the extent of their U.S. effectively connected income, may be permitted or required to file a combined report if they conduct a unitary business and have common ownership or control (more than 50% of voting stock)
    • Combination across tax types remains prohibited
    • The combined group is treated as if it were a single tax entity
    • Commonly owned groups may also elect to a file a combined return, without regard to whether they conduct a unitary business, and the election is effective for 7 years

    Expense apportionment

    • Investment income and other exempt income are not taxable, thus deductions for interest expenses attributable to such income are disallowed
      • Any actual interest expense attribution that exceeds income must be added back to income
      • For more information see here

      Net operating loss

      • Net operating losses (NOLs) that were incurred before 2015 are converted into a Prior Net Operating Loss Conversion (PNOLC) subtraction to stabilize their value for financial accounting purposes.
      • A taxpayer’s NOL deduction (NOLD) is the sum of allocated business losses incurred in tax years beginning on or after January 1, 2015, less any portion of losses that were deducted as a NOLD in a prior tax year.
      • The NOLD is no longer limited by the federal NOLD source year or amount
      • The NOLD is a deduction against allocated business income and is applied after the PNOLC subtraction.
      • NOLD is not allowed for an NOL sustained during any year in which the corporation generating the loss was not subject to tax under Subchapter 3-A.
      • NOLs can be carried back 3 years, except that no NOL earned in 2015 or later can be carried back to a tax year beginning before January 1, 2015, and must be carried back to the earliest year first

      Important definitions

      • Business income is entire net income minus investment income and other exempt income
        • Entire net income is the total net income from all sources subject to certain statutory modifications
        • Business income includes the following:
          • Interest income and gains and losses from debt instruments or other obligations, unless the income cannot be included in allocable business income under the U.S. Constitution
          • Gains and losses from stock of a corporation conducting a unitary business with the taxpayer
          • Dividends and gains and losses from stock that does not qualify as investment capital
          • Dividends and gains from stock that do not qualify as investment income because gross investment income exceeds 8% of ENI
          • Income from cash
          • Exempt CFC income is income received from a controlled foreign corporation that is conducting a unitary business with the taxpayer but is not included in the combined group. This includes Subpart F income and I.R.C. §956 dividends.
          • Exempt unitary dividends are dividends from unitary corporations not in the combined group because they are: (1) taxable under another tax chapter, (2) alien corporations that are not deemed domestic and have no ECI, (3) insurance corporations that are not taxable under Subchapter 3-A, or (4) less than 50% directly or indirectly owned or controlled by the taxpayer.

          Filing dates

          For tax years beginning before January 1, 2016:

          • Annual returns and tax payments must be postmarked by March 15 of the following year, if the corporation chooses an accounting period that is based on the calendar year
          • A corporation that uses an accounting period other than the calendar year (e.g., a fiscal year) must file a return on the 15th day of the third month after the close of its fiscal year
          • Annual returns and tax payments must be postmarked by April 15 of the following year, if the corporation chooses an accounting period that is based on the calendar year
          • A corporation that uses an accounting period other than the calendar year (e.g., a fiscal year) must file a return on the 15th day of the fourth month after the close of its fiscal year

          Additional Extensions
          A business with a valid six-month extension may request up to two additional three month extensions by filing Form NYC-EXT.1. A separate form must be filed for each three month extension requested.

          Paying Estimated Tax
          For tax years beginning before January 1, 2016, if the preceding year’s tax was more than $1,000, the taxpayer or combined group, as applicable, must pay an amount equal to 25% of this tax at the time the preceding year’s tax return is filed or at the time a request for an extension is filed, as the first installment of estimated tax for the current year.

          For tax years beginning on or after January 1, 2016, if the second preceding year’s tax was more than $1,000, the taxpayer, or combined group, as applicable must pay an amount equal to 25% of this tax on or before March 15, as the first installment of estimated tax for the current year. Filers that use an accounting period other than the calendar year must pay this amount at the time the preceding year’s tax return is filed or at the time a request for an extension is filed.

          If the requirement for filing a Declaration of Estimated Tax is first met…	The Due Date for Filing is…
          Before June 1	June 15
          June 1, up to August 31	September 15
          September 1, up to November 30	December 15
          Instead of the December 15 Declaration, a completed tax report, with payment of balance due, if any, may be filed by February 15 of the following year.

          
          For filers that use an accounting period other than the calendar year, the corresponding months of the accounting period should be substituted for the months specified above. If a due date falls on a weekend or a legal holiday, the filing must be made by the next business day.

          Forms

          • 2024 Estimated Business Corporations and Subchapter S General Corporations - NYC-400, NYC-300 (MFI)

          2023 business corporation tax forms

          • NYC-EXT - Application for Automatic Extension of Time to File Business Income Tax Returns
            File online with e-Services
          • NYC-EXT.1 - Application for Additional Extension
            File online with e-Services
          • NYC-2 - business corporation tax Return
            Download Instructions
            Download business corporation tax Worksheet - You must attach this worksheet to amended returns reporting changes or corrections to taxable income or other bases of tax by the IRS or New York State DTF.
          • NYC-2.1 - Investment and Other Exempt Income and Investment Capital
            Download Instructions
          • NYC-2.2 - Subtraction Modification for Qualified Banks and Other Qualified Lenders
            Download Instructions
          • NYC-2.3 - Prior Net Operating Loss Conversion (PNOLC) Subtraction
            Download Instructions
          • NYC-2.4 - Net Operating Loss Deduction (NOLD)
            Download Instructions
          • NYC-2.5 - Computation of Receipts Factor
            Download Instructions
          • NYC-2.5A - Computation of Receipts Factor
            Download Instructions
          • NYC-2.5A/BC - Computation of Receipts Factor
            Download Instructions
          • NYC-2A - Combined Business Corporation Tax Return
            Download Instructions
            Download Business Corporation Tax Worksheet - You must attach this worksheet to amended returns reporting changes or corrections to taxable income or other bases of tax by the IRS or New York State DTF.
          • NYC-2A/BC – Member’s Detail Report
            Download Instructions
          • NYC-2S - Business Corporation Tax Return – Short Form
            Download Instructions
            Download Business Corporation Tax worksheet - You must attach this worksheet to amended returns reporting changes or corrections to taxable income or other bases of tax by the IRS or New York State DTF.
          • NYC-9.5 - Claim for REAP Credit Applied to Business, General and Banking Corporation Taxes
          • NYC-9.6 - Claim for Credit Applied to Business and General Corporation Taxes
          • NYC-9.7C - UBT Paid Credit (Business Corporations)
          • NYC-9.8 - Claim for Lower Manhattan Relocation Employment Assistance Program (LMREAP) Credit Applied to Business, General and Banking Corporation Taxes
          • NYC-9.10 - Claim for Biotechnology Credit Applied to Business and General Corporation Taxes
          • NYC-9.12 - Claim for Beer Production Credit
          • NYC-222 - Underpayment of Estimated Tax by Business and General Corporations
          • NYC-245 - Activities Report of Business and General Corporations
            File online with e-Services
          • NYC-300 for 2024 – Mandatory First Installment (MFI) by Business C Corporations
          • NYC-399 - Schedule of New York City Depreciation Adjustments
          • NYC-399Z - Depreciation Adjustments for Certain Post 9/10/01 Property
          • NYC-400 for 2024 - Estimated Tax by Business Corporations and Subchapter S General Corporations
            File online with e-Services
          • NYC-579-COR - Signature Authorization for E-Filed Business Corporation Tax Return