Business Corporation Tax FAQs

The 2015 Business Corporation Tax forms and instructions for single corporation filers (Form NYC-2 and feeder forms) and for combined group filers (Form NYC-2A and feeder forms) are currently available on our website.

If the forms you need to file your Business Corporation Tax return for 2015 are not yet available to be e-filed, you should electronically file a Form NYC-EXT Request for Six-Month Extension to File. Additional information about e-filing your extension request can be found here.

The Department is accepting e-filed 2015 Forms NYC-2, 2.1, 2.2, 2.3, 2.4 and 2.5 and other ancillary forms. Check here periodically check here for the most current e-file approval status of each software developer’s 2015 Business Corporation Tax forms.

You should file again using the appropriate tax return for the Business Corporation Tax and check the box to indicate that it’s an amended return. The Form NYC-2 is available on our website, and through certain approved software vendors, for single corporation filers. Corporations that file on a combined return must use the Form NYC-2A, which is also available on our Website.

Yes. If an alien corporation has income, gain, or loss that is effectively connected with a U.S. trade or business, conducted in New York City, it is considered a taxpayer under the Business Corporation Tax. If an alien corporation has income, gain, or loss that is effectively connected with a U.S. trade or business, it is subject to the requirements of a combined report.

Yes, because this capital may also generate taxable business income, such as capital gains from the sale of stock in a unitary corporation that is not included in a combined report with the taxpayer.

Yes, a business capital investment in a company that would be taxable under chapter 11 if it conducted business in the City is eligible for the .075% tax rate.

No, a business capital investment in an HMO is subject to the generally applicable .15% tax rate and is not eligible for the .075% tax rate because an HMO is subject to tax as a regular business corporation rather than an insurance corporation. DOF will monitor the appeal of the NYC Tax Appeals Tribunal decision In The Matter of Aetna, Inc., TAT(E)12-3(GC), TAT(E)12-4(GC) (NYC Tax App. Trib. June 3, 2016) for its effect, if any, on this conclusion.

For the avoidance of doubt, DOF will not look-through to the underlying investments of the HMO, to characterize the investment in the HMO itself. The nature of the business capital investments of the HMO will only be relevant to the extent it is a separate filer and computes its own tax on capital or it becomes a member of a combined group, in which case, it will aggregate its business capital investments with the other members of the combined group to determine the total tax on capital for the group.

The credit carryforward provisions were included in the new Subchapter 3-A. Any credit carried forward from a year prior to corporate tax reform may continue to be carried forward and used against the tax imposed under Subchapter 3-A in tax years 2015 and after, under the same rules that applied prior to reform.

• Credits with carryforwards of unlimited duration can continue to be carried forward until used
• Credits with carryforwards of a limited duration can be carried forward and used until their expiration.
  • Example:
    A taxpayer, who relocated in 2008, was allowed a $3,000 Lower Manhattan Relocation and Employment Assistance tax credit in 2013 that has a 5-year carryforward duration. The taxpayer used $1000 in 2013 and $500 in 2014. The unused credit carryforward of $1,500 may continue to be carried forward until 2018, or whenever it is completely used, whichever comes first. Further, the twelve year benefit period also carries over into Subchapter 3-A.

No. The Department of Finance is bound to follow the taxpayer’s election.

The 20% ownership presumption is rebuttable. If the Department chooses to rebut the presumption, the burden will fall on the Department to demonstrate that the less than 20% owned subsidiary is unitary with the taxpayer.

No. Under U.S. Supreme Court case law, a state cannot treat an item of income of a taxpayer subject to tax in the state as apportionable business income if the state does not have constitutional nexus with that item of income. The Department will not attempt to offer guidance beyond existing Supreme Court case law as to how this constitutional doctrine would apply under particular facts and circumstances.

The tax rate applicable to a qualified New York manufacturing corporation depends upon both the amount of its business income allocated to the City and the amount of its total business income prior to allocation. Administrative Code sections 11-654(1)(k)(1), (2) and (3) require separate alternative  tax rate calculations using each amount. To determine its applicable tax rate, the corporation must, first, calculate its tax rate with reference to business income allocated to the City, second, calculate its tax rate with reference to business income prior to allocation, and, third, select the highest rate resulting from these calculations. Each calculation is necessary even if the corporation’s allocated business income is less than $10 million.  Accordingly, the tax rate based on total business income prior  to allocation sets a minimum, not a maximum, tax rate. No tax rate reduction applies at all if the corporation’s income allocated to the City is $20 million or greater or its business income prior to allocation is $40 million or greater.

• Example A:
  A qualified New York manufacturing corporation has $15 million of business income allocable to the City and $25 million of total business income. It must calculate alternative tax rates using each amount of income.  The applicable tax rate is 6.638% because:
  1. Tax rate based on business income allocated to the City. 4.425% + (4.425% x ([$15 million - $10 million] / $10 million)) = 6.6375% (round to 6.638%),
  2. Tax rate based on total business income prior to allocation.     4.425% + (4.425% x ([$25 million -
     $20 million] / $20 million)) = 5.53125% (round to 5.531%), and
  3. The higher rate is 6.638%.
• Example B:
  A qualified New York manufacturing corporation has $15 million of business income allocable to the City and $35 million of total business income. It must calculate alternative tax rates using each amount of income.  The applicable tax rate is 7.744% because:
  1. Tax rate based on business income allocated to the City. 4.425% + (4.425% x ([$15 million - $10 million] / $10 million)) = 6.6375% (round to 6.638%),
  2. Tax rate based on total business income prior to allocation.  4.425% + (4.425% x ([$35 million   -
     $20 million] / $20 million)) = 7.74375% (round to 7.744%), and
  3. The higher rate is 7.744%.
• Example C:
  A qualified New York manufacturing corporation has $15 million of business income allocable to the City and $41 million of total business income. The applicable tax rate is 8.85% because total business income is $40 million or greater.
• Example D:
  A qualified New York manufacturing corporation has $25 million of business income allocable to the City and $25 million of total business income. The applicable tax rate is 8.85% because business income allocated to the City is $20 million or greater.
• Example E:
  A qualified New York manufacturing corporation has $8 million of business income allocable to the City and $25 million of total business income. It must calculate alternative tax rates using each amount of income.
  The applicable tax rate is 5.531% because:
• Example F:
  A qualified New York manufacturing corporation has $8 million of business income allocable to the City and $15 million of total business income. It must calculate alternative tax rates using each amount of income.  The applicable tax rate is 4.425% because:

Corporate tax reform did not change the MFI rules. MFI will continue to be based on rules in effect for a taxpayer’s 2014 tax return.

No. The mandatory first installment is still based on the prior year’s tax. The remaining three estimated tax payments should reflect the anticipated liability for the current tax year. Therefore, when determining the amount of the 2nd, 3rd and 4th estimated tax payments for tax years that begin on   or after January 1, 2015, the effect of the corporation tax reform rules should be taken into consideration.

However, as a general matter, the Department will not assert an underpayment of estimated tax for any payment due on or prior to June 15, 2015, if the taxpayer makes the required declarations and payments in full no later than the first due date after June 15, 2015 on which an installment of estimated tax is required to be paid, together with all other such declarations and  payments.

NOLs can be carried back 3 years. However, an NOL generated in 2015 or later cannot be carried back to a tax year commencing prior to January 1, 2015.

No. The corporation may establish an NOL carryforward balance under the GCT that reflects the NOLs it incurred while a taxpayer in the City, and it must determine that balance as if it used the greater of (i) the NOLs it would have used under the GCT and (ii) the NOLs it effectively used under the Business Corporation Tax (Subchapter 3-A). The following steps explain this calculation:

1. Determine the corporation’s NOL carryforward balance, if any, at the end of its last tax year beginning in 2014 under the GCT.
2. Recalculate the NOLs the corporation incurred in each tax year beginning on or after January 1, 2015 that it was a Subchapter 3-A taxpayer, as if it had been a GCT taxpayer in each year, and add that amount to the balance in Step #1.
3. Compute the hypothetical amount of NOLs that the corporation would have used if it was a GCT taxpayer in each tax year that it was a Subchapter 3-A taxpayer beginning on or after January 1, 2015. (Generally, an S-corporation may annually deduct an NOL that is equivalent to the amount it would have been allowed to deduct for federal purposes, if it had not made the election to be an S-corporation, subject to certain statutorily specified limitations. Ad. Code § 11-602(f)(3)).
4. Compute the amount of NOLs effectively used by the corporation under Subchapter 3-A, by determining the amount of the PNOLC subtraction pool and NOL carryforward that it used and then converting those amounts into pre-apportioned NOLs under the GCT.
5. Determine the S-corporation’s current NOL carryforward balance under the GCT by subtracting the greater of the amounts determined in Step #3 and Step #4 from the amount determined in Step #2.

Example:

B is a non-financial corporation and it elects to be taxed as an S-corporation for federal income tax purposes, effective January 1, 2016. It has been a corporate taxpayer in the City since its formation.

• At the end of its 2014 tax year, B’s unabsorbed net operating losses (UNOL) equal $100,000; its base year business allocation percentage (BAP) is 80%; and its base year tax rate is 8.85%.
• B’s PNOLC subtraction pool is $80,000, which is the tax value of its UNOL divided by 8.85%. Ad. Code § 11-654.1(b)(2).
  • The tax value of B’s UNOL is $7,080, which is the amount of its UNOL multiplied by its base year BAP and tax rate. Ad. Code § 11-654.1(b)(10).
• In tax year 2015, B has federal gross income of $150,000, and deductible operating expenses of $95,000; its federal NOL deduction for the year is $55,000; no statutory adjustments apply to its entire net income; it uses 50% of its PNOLC subtraction pool pursuant to a valid election under Ad. Code § 11-654.1(b)(4).

Under the steps above, B would calculate its NOL carryforward for the GCT as follows:

1. B’s NOL carryforward balance was $100,000 at the end of its 2014 tax year.
2. B did not incur an NOL in 2015.
3. The amount of NOLs that B would have been able to use under the GCT is $55,000 ($150,000 minus $95,000 = $55,000).
4. The NOL-equivalent amount of PNOLCs that B used under Subchapter 3-A is $50,000 ([$40,000 x 0.885] / 0.8 / 0.885 = $50,000).
5. B’s new NOL carryforward balance under the GCT is $45,000 ($100,000 - $55,000 = $45,000).

For tax years beginning on or after January 1, 2015, both the PNOL conversion subtraction and the NOLD are applied against apportioned business income.

Unused net operating losses incurred for tax years beginning prior to January 1, 2015, must be converted into a prior net operating loss conversion (PNOLC) subtraction pool. The PNOLC pool and the amount to deduct annually are computed on Form NYC-2.3, Prior Net Operating Loss Conversion (PNOLC) Subtraction, and reported on Schedule B, line 33 on Form NYC-2 or NYC-2A. Unused net operating losses from tax years beginning prior to January 1, 2015, are not included on Schedule B, line 35, Net operating loss deduction, of Form NYC-2 or NYC-2A.

In order to carryback the loss, file an amended return for the year to which the NOL is being carried back, and include the amount of NOL being carried back on Form NYC-2 or NYC-2A Schedule B, Line 35. If the NOL is being carried back to the first tax year that begins on or after January 1, 2015, file a paper return and write in the NOL on Schedule B, Line 35. Form NYC-2.4 must be attached to the amended return, showing the specific tax year from which NOLs have been used to reduce business income in Schedule A. A copy of the return previously filed with the City for the loss year must also be attached to the amended return.

Note that an NOL may be carried back three taxable years preceding the tax year of the loss (the loss year). However, a loss cannot be carried back to a tax year beginning before January 1, 2015. The loss is first carried to the earliest of the three tax years preceding the loss year. If the loss is not entirely used in that year, it is carried to the second tax year preceding the loss year, and any remaining amount is carried to the third tax year immediately preceding the loss year. Any unused amount of loss then remaining may be carried forward for as many as 20 tax years following the loss year. Administrative Code § 11-654.1(3)(d).

Taxpayers who have made the 50% PNOLC subtraction election can revoke that election by timely filing an amended 2015 Form NYC-2 or NYC-2A return. The prior net operating loss conversion subtraction amount on Line 33 of Schedule B should reflect a 10% PNOLC subtraction allotment, and a revised Form NYC-2.3 must be attached which indicates that the PNOLC pool will be utilized over a ten year period.

An amended Form NYC-2 or NYC-2A return must be filed along with a revised Form NYC-2.3 for each subsequent tax year in which the taxpayer could have claimed a PNOLC subtraction or carried forward an unused PNOLC subtraction balance.

Any change to a taxpayer’s UNOL may be made within the general 3-year limitations period for assessments and refunds provided under Admin Code Section 11-674(1), determined with regard to an extension of time agreed to under 11-674(3)(b), for the return on which a PNOLC subtraction is first claimed.

The BCT will not apply to C-corporations for tax years beginning on or after January 1, 2015. Therefore, a former BCT taxpayer is subject to tax under Subchapter 3-A starting with its first fiscal tax year that begins on or after January 1, 2015.

• Example:
  An BCT taxpayer with a fiscal tax year beginning on October 1, 2014 will be subject to tax under the BCT until September 30, 2015. The taxpayer will then be subject to tax under Subchapter 3-A for its fiscal tax year that begins on October 1, 2015.

  
  

The City intends to issue rules that generally correspond to the regulations New York State will issue under Article 9-A of the Tax Law to implement corporate tax reform, in so far as the underlying statutes themselves correspond. The City will make draft regulations available after the State has finalized its new and revised regulations and indicates that it will initiate adoption under the formal New York State Administrative Procedures Act. As they are developed, drafts of various regulatory amendments will be posted to the New York State Department of Taxation and Finance website for public comment. These draft regulatory amendments are not final and should not be relied upon.

A large corporation is one that had, or whose predecessor had, business income allocated within the City, of at least $1 million for any of the three tax years immediately preceding the tax year for which the exception is being sought. See, Administrative Code § 11-676(5)(a).