NYC-WTC_000195490

NYC 9/11 Public Portal Document

GENERAL CORPORATION TAX GENERAL CORPORATION TAX 1992-2002 The altcrna The general corporation tax is liability. Thi.s h 2.0 projected to account for 6.6 percent of difficulties or tax revenue in 2002, or $1,490 million. 1.8 carryforwards. and investment Tax Base and Rate: New York 1.6 capital and inv City’s general corporation tax was first enacted in 1966 and is imposed on all i corporations, domestic and foreign, for ‘ 1.2 the privilege of doing business, I'.' 0.15 percent rat

The additi ouLstanding vo, employing capital, owning or leasing derived from ! property or maintaining an office in New , employed in b York City. Banking companies are , 0.81___ 1___I--- 1___ I___ I--- 1-- -i--- L-- 1—1 subsidiary capi subject to the banking corporation tax - 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 and therefore do not pay the general- Fiscal Year , Legislative corporation tax. Insurance firms. rate w.h reduce nonprofit corporations and residential mortgage insurance corporations (REMiGs) are exempt from the 1987, when it \ general corporation tax. For taxable years beginning on or after January 1, 1998, the general corporation tax also does not apply to an alien corporation whose activities in New York City are limited solely to investing or In rcsponsi trading in stocks, securities or commodities for its own account. ' the general cor Responsibility To determine tax liability, a corporation is required to make three alternative calculations anil compare Recovery Sy.st these to a fixed minimum tax of $300. The tax due is the largest of the four amounts. The three alternative could be rapid tax calculations are: (1) net income: 8185 percent of the firm’s entire net income allocated to the City; (2) Federal definit capital: 0.15 percent of'the firm’s business and investment capital allocated to the City; and (3) properly under income-plus-compensation: 2.655 percent of the sum of allocated net income plus the compensation paid to a substantial 1 individual shareholders owning at least five percent of the firm. There is an additional tax on subsidiary depreciate, asse capital allocated to the City, at the ratd of 0.075 percent. The sum of the liability paid on the highest of the in allowing Nc four alternative bases and the tax on subsidiary capital is the firm’s total tax liability:. placed in servi ( The starting point for determining-the net income base, 78 percent of corporate liability in tax year 1997, The Fedci is Federal taxable income, which must be modified to account for differences between New York City and limiting or eli Federal treatment of various itcms, including depreciation, tax-exempt interest and net operating loss, allowances) ar deductions. This modified income must be divided between business income and investment income, and previous law. then allocated between income derived from New York City activities and income derived from activities New' York Stai outside of the City. Business income is defined as the firm’s entire net income less its investment income took steps to I (dividends and interest from nonsubsidiary operations). Investment income is allocated according to the effective for K amount of capital employed in New York City by the issuing corporation. The allocation formula used by changes made most firms for business income is the average of the following ratios: (1) New York City tangible property to City: (1) exe total property; (2) New York City receipts to total receipts; and (3) New York City payroll to total payroll. ceiling on the Manufacturing firms are allowed to “double weight” the receipts factor for tax years beginning on or after July business capi 1, 1996. Slightly over half of the general corporation tax paid on the net income basis is from firms which included in tl allocate business income because they have operations both inside and outside of New York City. franchise, inc( which require The income-plus-compensation base accounted for approximately 15 percent of corporate tax liability in capital stock! tax year 1997. The purpose of this alternative base is to tax firms which may lower their taxable income by disguising dividends (which are not deductible) as salaries and other forms of compensation (which are In June cj deductible). The starting point for determining this base is New York City allocated net income, to which were made tij must be added back the compensation paid to shareholders owning more than five percent of the corporation’s legislation, w Outstanding stock. After a statutory deduction of $40,000, the firm applies the 8.85 percent rate to 30 percent tax from $12 of this base (hence the 2.655 percent effective tax rate). acquisition at

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NYC-WTC_000195553