Understanding NYC corp tax is imperative for any incorporated business located in the state of New York. Depending on the type of business you conduct, this will influence the type of return you file. Be taking a proactive approach, you will ensure that your New York City corporate taxes are filed on time, reducing your risk of costly fees or penalties.
General Corporation Tax (GCT)
The GCT applies to S-Corporations and qualified subchapter S subsidiaries. If your corporation is taxable under the GCT, you will need to file a GCT tax return for all years beginning on or after January 1, 2015. All other corporations will file under Subchapter 3-A tax returns. You can learn more through the NYC Department of Finance.
GCT: Who Has to Pay This Tax?
If you are a New York-based corporation, you will need to pay GCT tax if any of the following are true:
- You are conducting business.
- You are employing capital.
- You own or lease a property within a corporate capacity or you maintain an office.
If you identify as one of the following corporations, you will likely be exempt from this tax:
- A dormant corporation, meaning you have not conducted business or hold title to any New York-based property.
- A corporation that is subject to Utility Tax or the New York City Banking Corporation Tax. This does not include vendors of utility services.
- A corporation that holds title to property, as outlined in Sections 501(c)(2) or (25). This includes insurance companies, not-for-profit companies that are exempt by the NYC Department of Finance, and limited profit housing companies (which operate under articles 2 and 11).
- Like numerous other states, New York does not recognize Federal or state-level S-Corporation elections. This means that S-Corporations are required to pay this tax when operating in the state of New York.
To find out more regarding tax forms and reports, please view all current GCT forms.
GCT Tax Credits: Biotechnology Tax Credit
If you are an owner or investor of a New York biotechnology company, you may be eligible for the Biotechnology Tax Credit. This industry involves scientific manipulation of living organisms, including plants, animals, and humans. Whether you are currently involved in genetic mapping or fingerprinting, this credit will be applied against the required General Corporation Tax.
Other requirements state that in order to be eligible, a company must not only engage in biotechnology but also meet the following criteria:
- Exhibit a research/development fund to net sales ratio that exceeds that average for all companies observed and surveyed by the National Science Foundation.
- Have no more than 100 employees, of whom 75 percent must work in New York.
- Have annual sales of $10 million or less.
- Have gross revenues that do not exceed $20 million in one year — this includes revenue from the corporation’s affiliates or members.
Automatic Extension for GCT
If your New York corporation is subject to GCT, you may receive an automatic six-month extension. This will require you to file Form NYC-EXT.
You can then apply for two 3-month extensions on top of your six-month extension. For each 3-month extension, a separate filing of Form NYC-EXT-1 will be required. When paying estimated tax in installments, please note:
- This value cannot be less than 90 percent of the tax that is finally determined.
- This cannot be less than the tax paid the previous year.
GCT Tax Rates
There are four methods for determining GCT in New York. The method that produces the largest amount of tax will be imposed.
These methods are as follows:
- Entire net income base — 8.85 percent of entire net income.
- Total capital base — 0.15 percent of business and investment capital. There are numerous variables to consider with this method.
- Alternative tax base — 8.85 percent of 15 percent of net income + the amount of compensation paid to any individual who owned more than 5 percent of the payer’s capital stock.
- A minimum tax based on the tax year. Please refer to all associated rates here.
Understanding corporate tax bases and rates associated with your New York City corporation will help you stay on track. Since there are so many variables involved, it is critical that you maintain accurate records and seek professional advice whenever possible.