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The New York Corporate Tax Structure

The one word which best describes the New York corporate tax structure, is the word “layered”. We’ve actually used that word plenty of times before.  We use it to discuss the sales tax system in New York, for instance.  And that’sis for good reason.  Throughout the nation, and particularly within New York individuals and businesses are subject to many different layers of taxation.  These layers often involve one’s particular location, earnings and other important data.

The New York corporate tax system is just as layered as the State’s sales tax system.  Businesses are subject to different types of tax.  The types depend on the specifics of their enterprise, their location and their earnings. The New York corporate corporate tax system underwent substantial changes in the recent past.  What we have today is essentially a simplified version of an previously even more complicated structure. 

As you would naturally expect, complying with New York corporate tax requirements, requires businesses to file certain forms.  They document their business income and confirm their tax liability. In this article, we will break down the corporate tax structure in the State New York.  We’ll do so by looking at the rates that apply to corporations. Then we’ll look at the fee structure for other entities such as limited liability companies and partnerships.  Finally, we’ll briefly reference the documents involved to fulfill these requirements. A full treatment of this issue is beyond the scope of our article here, though.  Hopefully our readers will still come away with a solid introduction to the complex corporate tax structure in New York. 

The New York Corporate Tax Rates 

New York State corporations must pay what is called a “franchise tax” on their income to the state; out-of-state corporations with significant business activity in New York State are also liable for this tax. Both C corporations and S corporations are liable for the tax. Unless they qualify as a “manufacturer” under specific New York requirements, corporations will pay the highest of the following three amounts: business income, business capital, and fixed dollar minimum (FDM).  

The Business Income Base

When calculating the New York corporate tax liability, the State uses your business income base as the starting point. The current rates for business income are as follows.  General corporate entities pay at a rate of 6.5%.  For qualified small businesses the rate is also 6.5%.  For qualified emerging technology companies (QETCs) the rate is 5.5%.  And for qualified New York “manufacturers” the rate is 0%. Business income is defined by the state, and it equals federal taxable income adjusted for various things.  Those “things” are, e.g., investment income, exempt income, etc.  

If a corporate entity pays tax on its business capital, then the State of New York will use your business capital base to calculate the liability. Business capital base is business capital apportioned to New York State after taking all available deductions. The current rates applicable to business capital are as follows: for general corporate entities it’s 0.100%, 0.085% for manufacturers and QETCs, and 0.04% for qualified cooperative housing corporate entities.  

The fixed dollar minimum is based on the corporation’s receipts from the State of New York. For the full list of the various amounts, see the New York State Department of Taxation and Finance’s page here. If a corporation has a subsidiary, or if it conducts its business (or a portion thereof) within the metropolitan commuter transportation district (or MCTD), then it may also be liable for an additional tax on top of the standard franchise tax. For details on the tax which is triggered by business activity within the MCTD, see our feature article on the MTA tax here. 

Filing Fees for Other Business Entities 

Other business entities – LLCs, LLPs and regular partnerships – must pay an annual filing fee rather than a franchise tax in the State of New York. The annual filing fee is based on the gross income of the entity. LLCs and LLPs have a separate fee table from regular partnerships. For LLCs and LLPs, the top filing fee is $4,500, and this applies to entities with gross income in excess of $25 million. The top filing fee for regular partnerships is also $4,500, and it also applies for entities with gross income greater than $25 million. For the full fee tables, see the State’s page here.  

Corporate Franchise Tax Returns

Corporations subject to the franchise tax must file Form CT-3, and this must be completed and submitted by April 15th (calendar year), or within three and one-half months (fiscal year). If a corporation expects to owe more than $1,000 in franchise tax, then the entity must file Form CT-400 and pay tax estimates on a quarterly basis. Entities required to pay the annual filing fee will submit Form IT-204-LL, and this form must be submitted by the 15th day of the third month after the close of the tax year. If an entity is subject to the MTA tax, then Form CT-3-M must be filled out and filed. 

As we stated at the outset, the New York corporate tax system for business entities certainly doesn’t lack in complexity. Following this system is not easy.  That’s particularly true for business owners who usually already have plenty of other things to worry about in the normal course of their business. That’s why business owners may want to consider hiring an accountant or attorney to comply with these requirements.

Call A New York City Tax Attorney For Assistance

Some experienced New York tax attorney may also be able to assist you as you attempt to navigate the complexities of the system.  If you have an issue related to New York’s corporate tax, or any other tax issue, don’t hesitate to contact us.  One of the top lawyers at the firm of Mackay, Caswell & Callahan, P.C.  is here to help!

Image credit: Christophe BENOIT