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2016 Business Corporation Tax Forms

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Guidance on the proper treatment of net operating losses (NOLs) incurred prior to 2015

Unused NOLs from tax years beginning prior to January 1, 2015, are not reported on the 2015 Form NYC-2 or NYC-2A, Schedule B, line 35, NOL deduction.  These losses must be converted into a prior net operating loss conversion (PNOLC) subtraction pool to be applied against apportioned business income over a period of years. Taxpayers compute the pool and the amount to annually deduct on Form NYC-2.3, Prior Net Operating Loss Conversion (PNOLC) Subtraction, and report the deduction on Schedule B, line 33 on Form NYC-2 or NYC-2A.
 
If you have already filed your 2015 Form NYC-2 or NYC-2A and have incorrectly reported the deduction for your prior year NOLs, you must file an amended 2015 tax return and include Form NYC-2.3 to avoid a denial of your incorrectly reported deduction and the possible issuance of a notice of deficiency.  
 
For more information, please see the 2015 Form NYC-2.3 and its instructions. 

New York City has changed the tax filing requirements for all federal C-corporations, including those that are banks. These corporations must file the new NYC-2 or NYC-2A tax form.

Read about:   Transitional Filing Relief for Taxpayers Affected by New York City’s Corporate Tax Reform Legislation

Guidance for filing Form NYC-300

Overpayments

Q. What overpayments do I include on Form NYC-300, line 3?

A: Line 3 is available as an option to taxpayers to satisfy the payment of the mandatory first installment (MFI) of estimated business corporation tax (BCT) by using overpayments from prior periods instead of remitting additional money. You are not required to apply overpayments to MFI.

Even though Form NYC-300 is due one month before the return or extension request for the preceding tax year (TY), you are allowed to apply an amount of overpayment of BCT that you expect to compute when you file your return or extension request. The amount you can report on Form NYC-300, line 3, would be:

  • the amount of BCT overpayment you computed on your TY 2015 tax return that was credited to the next period, plus
  • the MFI and second, third, and fourth estimated BCT installment payments you made in your 2016 tax year, minus
  • the amount of TY 2016 tax computed or estimated for your TY 2016 BCT return or extension request.

You must then take into account the amount you report on Form NYC-300, line 3, to determine the amount of BCT overpayment you report on the return or extension request you file one month later.

Note: The Tax Department applies all BCT payments to satisfy the earliest tax liability first. Thus, the application of funds may differ if the final tax computed for TY 2016 does not produce the amount of BCT overpayment you applied toward your TY 2017 MFI payment. Form NYC-300 MFI funds or credits could be redirected or reduced to satisfy your TY 2016 BCT liability if the TY 2016 BCT overpayment you are claiming is reduced. In such instances, you may incur penalties and interest.

If you have any uncertainty about the available amount of BCT overpayment that could be applied on Form NYC-300, line 3, you should satisfy the MFI for TY 2017 with a payment of new funds and disregard line 3. Any BCT overpayment computed on your TY 2016 tax return or extension request would be eligible for application towards your tax year 2017 second, third, and fourth BCT installments.

Example:
Corporation A filed a TY 2015 BCT return and computed a $3 million tax due. It computed a TY 2016 MFI due of $0.75 million (25% of $3 million). It also remitted a total of $4.7 million for TY 2015 estimated BCT payments during the year. When the taxpayer filed its TY 2015 return, it showed:

2015 tax plus 2016 MFI $3 million + $0.75 million = $3.75 million
Sum of 2015 estimated payments (2015 MFI due shown on 2014 return plus payments 2, 3, and 4) $4.7 million
Overpayment on 2015 return credited to the next period $4.7 million – $3.75 million = $0.95 million

After making the 25% MFI payment of $0.75 million for the 2016 tax year, the taxpayer made three (3) installment payments of $750,000 each. Therefore, it had $3.95 million available to apply to TY 2016 BCT liability, comprised of the following:

  • $0.95 million overpayment on the TY 2015 tax return
  • $0.75 million TY 2016 MFI, reported on the TY 2015 tax return
  • $2.25 million from TY 2016 estimated tax payments 2, 3, and 4

When Corporation A files its Form NYC-300 to compute and remit its TY 2017 MFI in March 2017, it estimates that its TY 2016 liability, which it will report on an extension request to be filed in April 2017, will be $3.5 million. Based on its TY 2015 BCT overpayment and its TY 2016 estimated BCT payments, Corporation A has available overpayments of $450,000 to use on Form NYC-300, line 3; that is $3.95 million available (representing TY 2015 overpayments and 2016 estimated payments made) minus $3.5 million in TY 2016 estimated tax due.

Note that the above available amount is not sufficient to satisfy the 25% MFI requirement for tax year 2017, which is $0.75 million and is based on the second preceding year’s tax (2015), so Corporation A must supplement the application of the $450,000 overpayment with an additional $300,000 payment.

Second preceding tax year

Q. For MFI payments due on or after March 15, 2017, a Federal C corporations subject to the Business Corporation Tax, is required to use the tax from its second preceding tax year when determining if the corporation is required to make an MFI payment of estimated tax and when computing the amount of its MFI payment. For these purposes, which tax year is the “second preceding tax year”?

A: The “second preceding tax year” is the taxpayer’s tax year occurring two taxable years prior to the tax year for which the MFI is due. A corporate taxpayer that was not required to file a return for the second preceding tax year does not have to make an MFI payment.

Example:
Corporation A is a calendar-year filer and Federal C corporation subject to the Business Corporation Tax. Corporation A must use the tax from its calendar tax year ending December 31, 2015, to:

  • determine if it is required to make an MFI payment for the 2017 calendar tax year, and
  • calculate the amount of the MFI payment that is due on March 15, 2017, on Form NYC-300, Mandatory First Installment (MFI) by Business C Corporations.