New York City’s Commercial Rent Tax (CRT): A refresher
Regular commercial rent tax credit
The first credit to consider is the regular commercial rent tax credit for tenants whose base rent is below $300,000. Below is the equation for calculating the credit amount.

It is clear from the above equation that if a taxpayer’s annual base rent is less than $250,000, a full tax credit will offset the tax due, so tenants with base rents less than $250,000 will not be subject to the CRT. Tenants with a base rent of more than $250,000 but less than $300,000 are eligible for a partial credit.
Small Business Tax Credit
The second credit is the Small Business Tax Credit, which was introduced on July 1, 2018. Clearly, the name of the credit indicates that it is only available to small businesses. The Department has established two thresholds for filtering out small businesses from the tax system: one for income, one for annual rent. The income threshold is $10,000,000, and the annual rent threshold is $550,000. If either threshold is exceeded, the taxpayer would be disqualified from receiving this credit. Below is the equation for calculating the Small Business Tax Credit.

Effective Aug. 30, 2005, New York City delineated the “World Trade Center Area” and waived the Commercial Rent Tax obligation for commercial tenants located here.
Beginning Dec. 1, 2005, New York City delineated the “Commercial Revitalization Program abatement zone.” Within the zone, the rent paid for “premises used for the selling of tangible goods directly to the ultimate consumer” is exempt from CRT.
It's worth noting that the exemption applies to all types of commercial tenants in the World Trade Center Area, but the CRT exemption applies only to retail sales premises in the Commercial Revitalization Program exempt zone.
Here is a map that illustrates the two zones.
The smaller, inner section is the World Trade Center Area.
Rent income from subtenants can be deducted from gross rent when calculating base rent. By reporting rent from subtenants, the taxpayer lowers its base rent and increases its chances of being qualified for tax credits. To do so, the taxpayer must include on their CRT return the subtenant’s name, EIN number, or Social Security Number. It is important to note that such rents may only be deducted from the gross rent of the premises the subtenant occupies and cannot be applied to any other premises rented by the taxpayer.
To the extent companies are not in compliance with the Department’s commercial rent tax requirements, a mitigation strategy might be available. That is, the Department has a no-name Voluntary Disclosure and Compliance Program (VDCP) for eligible companies. Potentially noncompliant businesses should contact their tax advisors to check their eligibility and to see if the VDCP makes sense.
Contact your trusted tax advisors for more information on the CRT and its credits and how they may apply to your business.
Corey L. Rosenthal, JD, Principal, Practice Leader, State and Local Tax
646.625.5729
Jamie Kelly, Manager
312.788.6058
Leon Yao, Tax Senior Associate
646.601.7898
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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 legal or professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice specific to, among other things, your individual facts, circumstances and jurisdiction. 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 partners, 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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