Commercial Rent Tax

New in 2009:

• New York City now has the authority to adopt rules that require electronic filing of tax returns.
• The interest rate on underpayments has been increased from the federal short-term rate plus five percent to the federal short-term rate plus seven percent.  Also, the default rate for underpayments has been increased from six percent to seven and one half percent.
• Certain taxpayers and tax preparers who file using tax software may be required to file electronically and could be subject to civil penalties for failure to do so.
• Provisions detailing crimes applicable to the tax has been redefined to conform to recent New York State revisions.

Who is Subject to this Tax?
Who is Exempt from this Tax?
Tax Forms and Filing Information
Tax Rates
Legal Authority
Frequently Asked Questions
Contact us

Who is Subject to this Tax?
If the following three conditions apply, a tenant who occupies or uses premises for carrying on any trade, business, profession, or commercial activity is required to file a Commercial Rent Tax return:

• The premises are located in the borough of Manhattan, south of the center line of 96th Street;
• The annual or annualized gross rent paid for such location is at least $250,000; and
  (NOTE: Tenants with annual taxable rents between $250,000 and $300,000 are eligible for a sliding-scale credit that partially offsets tax liability.)
• The tenant does not meet any exemption criteria, such as short rental periods, residential subtenants, use for theatrical productions, and not-for-profit status. 

A "tenant" is defined as one who pays rent as a lessee, sub-lessee, licensee, or concessionaire. A shareholder in a cooperative corporation is also considered a tenant because he or she owns shares in the corporation that owns the property. The following taxpayers must also pay Commercial Rent Tax if they meet the criteria listed above:

• Those who occupy space in buildings owned by spouses or parents;
• Those who occupy space in buildings they, themselves, own, individually, or jointly with another person other than a spouse or registered domestic partner;
• Those who occupy space in buildings owned by corporations where they are an officer or holder of all or part of the corporation stock;
• A corporation, occupying space in a building that is owned by a subsidiary corporation or by a parent corporation; and
• A corporation, occupying a space in building owned by an officer or stockholder of the corporation.

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Who is Exempt from this Tax?
The following are not subject to the Commercial Rent Tax:

• Taxpayers whose annualized base rent is less than $250,000 (before the 35 percent rent reduction and the NYC Commercial Revitalization Program special reduction) are not subject to the Commercial Rent Tax. However, they may still be required to file a tax return.
• Tenants who rent premises for 14 days or less during the tax year.
• Tenants, other than operators of hotels, who use at least 75 percent of the floor space to rent to others for residential purposes.
• Tenants renting premises for certain theatrical productions are exempt from the tax for the first 52 weeks after the production begins.
• Various governmental bodies and nonprofit religious, charitable, and educational organizations. Other nonprofit organizations will be exempt if they do not use the premises for commercial purposes and receive a written exemption from the tax from Finance.
• Tenants located in the "World Trade Center Area." Please refer to the CR-A instructions for a detailed definition of this area's boundaries
• Rent paid for premises used for retail sales purposes, where such premises are located in the Commercial Revitalization Program abatement zone.

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Tax Forms and Filing Information
The following forms are applicable to the filing of Commercial Rent Tax returns:

CR-Q Quarterly Returns

 Download Form (72k)
 Download Instructions (142k)

 Download Form (68k)
 Download Instructions (137k)

CR-A Annual Returns

CR-A 2008-09 Commercial Rent Tax Annual Return
(applicable for the tax period June 1, 2008 to May 31, 2009 only)
Download Form (73k)
Download Instructions (144k)
File online with E-File

CR-A 2007-08 Commercial Rent Tax Annual Return
(applicable for the tax period June 1, 2007 to May 31, 2008 only)
Download Form (73.8k)
Download Instructions (140.9k)
File online with E-File

CR-A 2006-07 Commercial Rent Tax Annual Return
(applicable for the tax period June 1, 2006 to May 31, 2007 only)
Download Form (76k)
Download Instructions (142k)
File online with E-File

CR-A 2005-06 Commercial Rent Tax Annual Return
(applicable for the tax period June 1, 2005 to May 31, 2006 only)
Download Form (32k)
Download Instructions (49k)
File online with E-File

Filing Deadlines
Every tenant must file an annual return on or before June 20th covering the preceding year, from June 1st to May 31st, unless both of the following are true:

(a) The annual gross rent paid for any taxable premises (before deductions and reductions) is $200,000 or less; and
(b) The rent received from any subtenant of the premises is $200,000 or less.

Every tenant who is subject to tax for a period must also file a quarterly return.

The total of the late filing and late payment penalties cannot exceed five percent for any one month

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Tax Rates
The statutory tax rate is 6 percent of the base rent (see below for definition) paid by tenants of the premises that are used to conduct any business, profession, or commercial activity.

• Effective June 1, 1996, a 25% base rent reduction reduced the effective rate to 4.5%.
• Effective September 1, 1998, a 35% base rent reduction further reduced the effective tax rate to 3.9%.
• In addition, a tax credit is allowed for taxpayers whose annualized base rent is between $250,000 and $300,000.

To Calculate Your Tax
Use quarterly and annual Commercial Rent Tax returns to compute the exact tax amount due. The tax is computed in the following manner for periods beginning on or after June 1st, 1997:

• Determine the amount of base rent that is subject to the tax.
  From the gross rent paid, subtract the amount attributed to residential use, rent received from subtenants, and all other permissible deductions, including that allowed under the Commercial Revitalization Program. The resulting amount is lowered further by the rent reduction percentage.
• If the premises were not rented for each month covered by the return, prorate the amount from Step #1 to determine the annualized or quarterly amount. Do this by dividing the base rent subject to the tax by the number of months rented, then multiplying by either 3 on the quarterly return or 12 on the annual return.
• Determine the effective tax rate, using the amount (from Step #1) for full-period rentals, or the prorated amount for partial-period rentals (from Step #2) and the chart on page two of the return. The various tax rates take into account the credit for taxpayers whose annualized base rent is at least $100,000 but less than $140,000.
• Compute the proper tax liability by applying the tax rate from Step #3 to the base rent amount from Step #1.

If you rented more than one premises in the part of Manhattan that is covered by the tax, repeat these four steps for each premises to determine your total tax liability. The amount due on the annual return is reduced by the total amount paid on quarterly returns for that fiscal year.

What Constitutes Base Rent?
For the purposes of calculating the Commercial Rent Tax (CRT), base rent is generally the rent paid by a tenant to his or her landlord for each taxable premises for a period, minus any rent received or due from a subtenant for the same premises and the same period of time.

The instructions to the Commercial Rent Tax return contain information about other types of deductions from base rent.

Where the base rent is for a period of less than one year (or for less than three months on a quarterly return), it must be prorated over the entire period of the return. This prorated base rent is used to determine the appropriate tax rate.

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Legal Authority
Title 11, Chapter 7, Administrative Code
Enabling Act: Chapter 257 of the Laws of 1966

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Frequently Asked Questions
What records related to Commercial Rent Tax should a taxpayer keep?
If a business ends during the year, what returns must I file?

What records related to Commercial Rent Tax should a taxpayer keep?
Every landlord of taxable premises and every tenant of taxable premises must keep the following records:

• Identification of each tenant or sub-tenant,
• The rent required to be paid,
• The rent paid and received,
• The location of each premises,
• The period of each occupancy, and
• All leases or agreements that fix the rents required to be paid and/or the rights of the tenants.

Records must be available for examination upon request by the Department of Finance or a duly authorized agent or employee. Leases and agreements that establish the rents required to be paid and/or the rights of a tenant should be kept for a period of three years after the expiration of the lease. Other records must also be kept for a three-year period after the annual return is filed (unless written permission is granted to destroy them before that time).

If a business ends during the year, what returns must I file?
If you cease to do business during the year, the tax is due immediately. You must file a return (Form NYC-CR-A) within twenty days after your business ceases. The amount of tax due is measured by your base rent, including escalations and other charges normally payable to landlord for the part of the tax year that you were doing business. If, under your lease, you are required to continue to pay rent, or if, for any reason, you continue to pay rent for the premises after business ceases, then you still must file the normally required returns.

Addtional Information
Refunds

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