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New York City Corporate Income Tax Reform Enacted



New York enacted legislation significantly changing the New York City corporate income tax system.


On March 31, 2014, Governor Cuomo signed New York State’s 2014-2015 budget, which contained significant beneficial tax changes for both individual and business taxpayers. At that time, New York City’s corporate tax system was not affected. Many taxpayers were concerned about the uncertainty of if and when the City might conform to some of the state’s revisions. The New York Legislature recently passed the 2015-2016 budget (S2009-B/A3009-B and S4610-A/A6721-A) which contains amendments that substantially, but not completely, conform New York City’s Corporate Tax system to the changes made to the New York State corporate income tax structure last year (See related tax alert here). These changes are applicable to all corporations and banks that are not S corporations. That is, S corporations continue to be subject to the existing General Corporation Tax or Banking Corporation Tax. (None of these revisions apply to the City’s unincorporated business tax). The revisions are effective for tax years beginning on or after January 1, 2015.

Corporate Tax Rates

The legislation reduces the tax rate for various types of business entities. The rate for corporations with less than $1 million of business income in NYC is reduced from 8.85% to 6.5%, and applies a smaller reduction for corporations with NYC business income between $1 million and $1,500,000 or overall business income between $2 million and $3 million. The tax rate for manufacturing corporations with less than $10 million of NYC business income is reduced from 8.85% to 4.425%.  A 9% tax rate now applies to major financial corporations, which is defined as a corporation with more than $100 billion in assets.

Combined Reporting

The combined reporting rules for New York City now resemble the rules for the state.  For tax years beginning on or after January 1, 2015, the ownership test for filing a combined report is reduced from 80% or more to more than 50%. The substantial intercompany transactions requirement has been eliminated. If a corporation meets the ownership threshold it is required to file a combined return if the corporation is engaged in a “unitary business.” If the ownership test is met, but a corporation is not engaged in a “unitary business,” it may make a seven-year election to file as a combined group. The legislation also explains how a combined group claims credits, NOLs and apportions its tax base.


Corporations are subject to the revised tax if they are doing business in the City, employing capital, or owning or leasing property in the City.  A component of New York State’s tax reform included the adoption of an economic nexus threshold for out-of-state corporations that derive receipts of a $1 million or more from activity in the state, however, New York City did not implement a similar standard. In New York City, there is an economic nexus provision for credit card companies only.  A corporation is doing business in the City if: (1) it has issued credit cards to 1,000 or more customers who have a mailing address within New York City as of the last day of its taxable year; (2) it has merchant customer contracts with merchants and the total number of locations covered by those contracts equals 1,000 or more locations in the City to whom the corporation remitted payments for credit card transactions during the taxable year; or (3) the sum of the number of customers described above plus the number of locations covered by its contacts described above equals or is greater than 1,000.

Net Operating Losses

The legislation creates a prior net operating loss (PNOL) conversion subtraction. The business income computation now includes a net operating loss deduction (NOLD) as well as the PNOL. The NOL carryback period is extended to three years for NOLs incurred in tax years beginning after 2014. The $10,000 limitation on carryback losses is no longer applicable and the carryback period is extended to three years with no dollar limitation.

Other Changes

  • Merging the Banking Corporation Tax and the General Corporation Tax
  • Adopting the phase-in of a single receipts apportionment factor from the current General Corporation Tax which will be fully effective for tax years beginning on or after January 1, 2018
  • Providing customer-based sourcing rules
  • Replacing the entire net income tax base with a business income tax base
  • Modifying the definitions of “investment capital” and “investment income” and exempting both from tax
  • Eliminating the tax on assets for banks
  • Repealing the alternative minimum tax base for income plus compensation
  • Increasing the maximum capital base tax to $10 million, but allowing a $10,000 reduction for all capital base tax calculations

Tax Bases and Rates under Subchapter 3-A1

Entire Net Income

Type of BusinessRate in Tax Year 2015 and thereafter
Qualified manufacturing corporations4.425% - 8.85%
Small businesses6.5% - 8.85%
Financial corporations (>$100 billion in assets)9%
Remaining taxpayers8.85%

- The tax rate for qualified manufacturing corporations phases out between $10 and $20 million of allocated business income and $20 and $40 million of business income before allocation.

- The tax rate for small businesses phases out between $1 and $1.5 million of allocated business income and $2 and $3 million of business income before allocation.

Qualified manufacturing corporations must meet property and receipts tests.

  • The taxpayer’s property located in New York State must be (i) more than 50% of all its real and tangible personal property, or (ii) $1,000,000 of manufacturing property.
  • The taxpayer must derive more than 50% of its gross receipts from the sale of goods produced by its manufacturing activity.

Small businesses qualify depending on their level of income.

Financial corporations (subject to the 9% tax rate) are corporations, or combined groups, that:

  • Report total assets exceeding $100 billion on their balance sheet, computed under GAAP, at the end of the taxable year, and
  • Allocate more than 50% of their overall receipts pursuant to the rules for allocating receipts from certain financial assets (including qualified and nonqualified financial instruments and commodities) and certain financial activities (including registered broker-dealer services, credit and consumer cards, and investment company services), or
  • Are registered as a financial institution, such as a bank, savings or thrift association, registered broker dealer, or agency, branch or foreign depository, except that, in the case of a combined group, more than 50% of the assets of the group must be held by one or more corporations meeting the enumerated classifications.

Capital Base

Type of BusinessRate in Tax Year 2015 and thereafter
Cooperative housing corporations0.04%
All other corporations0.15%
Modification: the portion of total business
capital directly attributable to stock in a subsidiary      that is taxable as a utility within the meaning of the  New York City Utility Tax or would have been taxable as an insurance corporation under the former New York City Insurance Corporation Tax
- The maximum tax is $10,000,000.
- A $10,000 reduction applies to all capital tax calculations (provided that the capital tax cannot be less than $0).

Fixed Dollar Minimum

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 $1,000,000$500
More than $1,000,000 but not over $5,000,000$1,500
More than $5,000,000 but not over $25,000,000$3,500
More than $25,000,000 but not over $50,000,000$5,000
More than $50,000,000 but not over $100,000,000$10,000
More than $100,000,000 but not over $250,000,000$20,000
More than $250,000,000 but not over $500,000,000$50,000
More than $500,000,000 but not over $1,000,000,000$100,000

More than $1,000,000,000

A corporation’s “New York City receipts” are the same as its New York City receipts for purposes of computing its business allocation percentage. If a return is filed for a period of less than one year, the minimum tax may be reduced.

What Does CohnReznick Think?
There are a number of significant tax changes included in the legislation. Given the number and complexity of the changes in both New York State and New York City, taxpayers should review the new provisions to see how the changes impact their specific tax position. In addition, taxpayers based within New York City should evaluate the impact of these changes, keeping in mind that there are a number of state provisions that were not adopted by the City.


For more information, please contact Corey L. Rosenthal, a CohnReznick principal, at or 646-625-5729, Peter Rabinowitz, a CohnReznick director, at or 646-625-5746, or Patrick Duffany, partner and State and Local Tax Practice Leader, at or 959-200-7270.

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.

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