On August 31, 2022, New York Governor Kathy Hochul signed a new bill (SB 9454/A. 10506) into law. The bill focuses on providing updates to several New York City (NYC) taxes.
Here’s are some of its biggest changes we think our New York clients should be aware of.
$1 M Economic Nexus Threshold for New York City Business Corporation Tax (BTC)
The City now conforms to New York State (NYS) franchise tax rules by utilizing a bright-line, economic nexus standard (i.e., a non-resident business may be subject to tax based solely on receipts derived from activity in New York). Those companies deriving $1 million or more in receipts will create nexus for purposes of the BTC (also corporations with less than $1 million, but at least $10,000 from NYC, will have nexus if they are part of a unitary group that has at least $1 million in NYC receipts). This new law emulates New York State’s “deriving receipts” language.
Those corporations filing in the state of New York (not NYC) should review any NYC activity they have to determine if they have nexus with NYC under the new requirements. And any corporate partners of partnerships that have nexus with the City should verify if they have new NYC filing requirements to attend to.
New York City Pass Through-Entity Tax (NYC PTET) Available in 2022
This allows eligible taxpayers (partnerships and subchapter S corporations) to elect to pay this entity-level income tax for 2022 (previously intended to take effect for 2023 tax year). The deadline to pay tax and make the election for the 2022 tax year is March 15, 2023.) Note: this tax is separate from NYS’ PTET, for which the deadline was not only extended but the amount of benefit for resident S corporations was increased — read more about those updates here.
Tax Relief from Receipt of COVID-related Grants
This provides a guide for the exclusion of income for New York City tax purposes, including NYC’s Small Business Resilience Grant Program and the COVID-19 Small Business Recovery Grant Program.
It is also worth noting the governor has also recently announced a first-in-the-nation Seed Funding Grant Program, which provides grants to support early stage, micro and small businesses in a recovering NY economy so they can continue to grow and operate.
MGO can help
If you have questions about other aspects of the new bill, contact our experienced State and Local Tax team.