SALT Strategies

NYC Corporate Tax Reform – Mayor and Governor Seem To Be In Sync

MWE Headshots Thumbnail JoePizzimenti - NYC Corporate Tax Reform – Mayor and Governor Seem To Be In SyncLast month, New York City Mayor de Blasio announced his proposal for “a major reform” of the city’s corporate tax regime.   Considering that the mayor and New York State Governor Cuomo do not always see eye to eye (they held separate press conferences throughout  blizzard Juno, for example), the mayor’s proposal appears to closely parallel one already signed into law by the governor.

According to the Mayor’s Press Release, the proposed modifications to the city’s Corporate Code will result in “modernizing an outdated system, providing vital tax relief to the city’s small businesses and local manufacturers, and streamlining City and State corporate tax codes.”

An initial read of the proposed modifications set forth in the press release indicates that the Mayor’s modifications to the New York City Corporate Tax Code are in line with those adopted by Governor Cuomo that were signed into law last March as highlighted in our New York State Tax “Climate Change” – Higher Taxes Forecast for Multistate Taxpayers .

Key Aspects to Keep In Mind Regarding The Mayor’s Proposal

The Mayor’s Proposal calls for its changes to be retroactively effective to January 1, 2015.

The Mayor’s Proposal does not seek any modifications or modernization of New York City’s Unincorporated Business Tax.

As highlighted in the Mayor’s Press Release the “de Blasio administration’s corporate tax reform will be revenue-neutral on an aggregate basis …”.

Significant Elements of the Mayor’s Proposal

As outlined in the release, here are some of the significant modifications that the Mayor’s Proposal seeks to implement,  a number of which closely correlate with those included in New York State’s 2014 Corporate Tax Reform:

  • Conforming the City tax code to State provisions in “the most important areas of tax computation, including updating the City’s corporate income tax and minimum tax codes to mirror the State codes.”
  • Adoption of a “new method for determining how corporations attribute net income”, “Market Based” sourcing –“based on where a firm’s markets are located, rather than the location of the business operations.”
  • Implementation of a “new method for computing net income that broadens the tax base by treating most income as business income.”
  • Merging the bank tax into the corporate franchise tax for corporations.
  • Adoption of unitary combined reporting rules.
  • Targeted relief for New York City’s small businesses and local manufacturers.
  • Excluding the first $10,000 of capital tax base.
  • Reducing the tax rate for small non-manufacturers with less than $1 million in allocated net income from 8.85 percent to 6.5 percent.
  • Reducing the tax rate for small manufacturers with less than $10 million in allocated net income from 8.85 percent to 4.425 percent.

Proposal’s Notable Distinctions

It should be noted that the Mayor’s Proposal will retain the alternative tax base on capital.  The Mayor’s Press Release indicates that the retention of the alternative tax based on capital “will help stabilize revenues in years of low profits for large corporations.”

The release further indicates that the “[R]emaining eligible banks and corporations will be subject to a capital base with a $10 million tax cap.”  This reflects an increase from the current New York City Corporate capital tax base.

Why You Should Care

The Press Release indicates that the Mayor’s Proposal will closely parallel the recently enacted New York State Corporate Tax amendments.  There are several potential modifications that may have significant corporate tax ramifications.

Market Based Sourcing

The release indicates that Mayor’s Proposal contains a Market Based Sourcing provision.  Market Based Sourcing will most likely increase a corporation’s New York City receipt factor and New York City corporate tax if:

  • The corporation derives revenue from services
  • The corporation performs the services for which it is paid from location(s)  based outside of New York City; and
  • The corporation has a significant portion of its customer base in New York City,

Unitary Combined Filing

The release indicates that the Mayor’s Proposal contains a mandatory unitary combined filing provision.  This provision will affect corporations that may be a member of a unitary group that previously were filing on a separate return basis or filing on a limited combined group basis that did not include all of the members of the combined group.


The release indicates that the Mayor’s Proposal will be retroactive to January 1, 2015.  Therefore, any potentially affected corporation should consider the ramifications of the Mayor’s Proposals in the calculation of its New York City corporate tax estimates as well as its tax provision.

Mayor’s Proposal Warrants Multistate Corporate Taxpayers Preparedness

Last week, Mayor de Blasio issued repeated warnings regarding the potential dangers arising from the imminent arrival of Winter Storm Juno. Both Mayor de Blasio and Governor Cuomo acted quickly to minimize the potential harm Juno could wreak on the City and State – including shutting down New York City’s subway.

After New York City was largely spared the wrath of the powerful storm, some expressed dismay of the Mayor’s conservative approach to preparation.  I, for one, thought that Mayor de Blasio’s and Governor Cuomo’s actions were wholly justified and prudent.  Their actions were evidence of their thoughtful leadership given the potential havoc and danger Juno posed to the City and State.

The preparedness reminded me of British statesman and novelist Benjamin Disreali, who wisely wrote “I am prepared for the worst but hope for the best.”