New York Governor Kathy Hochul has signed a bill into law that expands New York City’s economic nexus rules and modifies the effective date for the New York City PTET to tax years beginning on or after January 1, 2022. The new legislation enacts a “bright-line” economic nexus standard for New York businesses and amends the current NYC PTET rules to allow NYC taxpayers to make an election earlier than originally announced. To qualify for the New York City election, taxpayers must first make the New York State election by September 15, 2022. Here are the main takeaways:
Economic Nexus Expansion
The new law expands the NYC Business Corporation Tax to apply to corporations “deriving receipts from activity in the city” for tax years on or after January 1, 2022. This applies to corporations with $1 million or more of NYC-sourced receipts. If a corporation does not meet the $1 million threshold, it will still be responsible for the tax if it has at least $10,000 in receipts from NYC sources, is a member of a unitary group and if it and the other members of the unitary group meet the $1 million threshold. As a result of this legislation, taxpayers that previously only filed in New York State may now have a New York City filing obligation as well. The new law is only applicable to New York City Business Corporation Tax (C-Corporations) and is not applicable to NY S-corporations (subject to the NYC General Corporation Tax) or Partnerships and Individuals (Subject to the NYC Unincorporated Business Tax).
The legislation modifies New York City’s current PTE tax by moving up the effective date for NYC PTE taxpayers from 2023 to tax years beginning on or after January 1, 2022. Only taxpayers that make the New York State PTET election qualify for the New York City PTET election. Taxpayers must make the New York State election by September 15, 2022. The New York City election must be made by March 15, 2023. Estimated PTE tax payments are not required for the 2022 tax year, though if the taxpayer wishes to submit an estimate, this should be completed before December 31, 2022. The PTE tax election applies to:
- Any partnership with NYC resident partners
- An S-Corp with only NYC resident shareholders
Next Steps for Taxpayers
If you wish to make a New York City PTET election for 2022, be sure to first make the New York State election, which must be completed by September 15, 2022. The NYC election procedure has not been released yet. We will keep you updated as more guidance becomes available. More information is provided on the New York State Department of Taxation and Finance’s PTET webpage. If you have questions about the PTET or nexus update and how it affects your business, please contact a member of the Janover team today.