Explaining Mandatory First Installment Procedures for New York State/New York City Corporate Tax
New York State and New York City tax reform legislation, enacted in 2016 and effective for tax years after December 30, 2015, require certain corporations to use the second preceding year's tax in determining whether a mandatory first installment (MFI) is required and the amount of the MFI. Both the state and the city issued guidance (TSB-M-16(10)C and NYC Finance Memorandum 16-7, respectively) that explain procedures for determining the new MFI.
New York State and New York City require a corporation to make, to each jurisdiction, an MFI payment when the corporation's second preceding year's tax, after tax credits, exceeds $1,000. MFIs due after March 14th 2017 must be reported on two forms: (1) CT-300, for New York State, and (2) NYC-300, for New York City. Corporations without a second preceding tax year do not need to make an MFI payment. These corporations must still declare estimated tax, due on the 15th day of months six, nine, and twelve of the taxable year, by completing Form CT-400 and NYC-400.
New York State
MFI is computed as follows:
- If the franchise, excise, or gross receipts tax, after tax credits, on the corporation's second preceding year's tax return exceeds $1,000, but does not exceed $100,000, the corporation must pay 25% of that tax as MFI
- If the franchise, excise, or gross receipts tax, after tax credits, on the corporation's second preceding year's tax return exceeds $100,000, the corporation must pay 40% of that tax as MFI
- The MFI for life insurance companies is 40% of the tax if the second preceding year tax exceeds $1,000
If the corporation is also subject to the MTA surcharge, they must use the same computation method as mentioned above to remit the MFI as the MTA surcharge estimated tax.
New York City
The MFI is to be computed as follows:
- If the New York City General Corporation Tax or Business Corporation Tax exceeds $1,000, the C Corporation must pay 25% of the estimated tax as MFI
- New York City does not have the 40% provision applicable to the New York State MFI or the provisions addressing Insurance companies.
Remaining Installment Payments
The payment procedures to remit the second, third, and fourth estimated tax installments have not changed. Corporations should pay the remaining annual tax due, i.e., after payment of the MFI, in three equal installments. These payments should be made on the normal estimated tax due dates using Forms CT-400 and NYC-400, for New York State and City, respectively.
What Does CohnReznick Think?
As a result of modifications to the federal tax filing due dates, there are significant changes with state tax filing due dates. While payment of the MFI is not related to the due date changes, taxpayers should review payment requirements for all tax filings and tax payments due in 2017.
If you have any questions, please contact Corey Rosenthal, Principal, State and Local Tax Services, at firstname.lastname@example.org or 646-625-5729; or Annie Yang, Manager, State and Local Tax Services, email@example.com or 646-601-7884.
Any advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues. Nor is it sufficient to avoid tax-related penalties. This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.