NYC-WTC_000195490

NYC 9/11 Public Portal Document

(5) amended the provision which allowed taxpayers to exclude from entire net income 50 percent of dividends from nonsubsidiary corporations by disallowing the deduction when the shares of stock are held for less than 1 45 days; (6) disallowed the option to use the business allocation percentage or the investment allocation percentage based upon whether the taxpayer was predominantly a business corporation or an investment 1) corporation; and (7) clarified the rules for issuer’s allocation percentage of a corporate issuer of stock.

Effective July 1, 1990, the general corporation tax was amended by local law to’conform the filing schedule for estimated payments to the schedule used at the Federal and New York State levels. Estimated payments by calendar year corporations are now due in September and Decentber.

The Federal Qmnibhs Budget Reconciliation Act of 1993 enacted a host of tax law changes including a number of provisions affecting corporate taxes which flow through to the City tax. Among the major provisions are a mark-to-market inventory valuation rule change for securities dealers, a reduction in the business meals and entertainment deduction and an increase in the capital investment limit allowed for small businesses. ' / ’ y'

In 1994, New York State enacted legislation which allowed'for the formation of a new type of business entity in New York State, a limited liability partnership or company (LLC). LLCs have some of the limited liability aspects of corporations and the tax treatment of partnerships for Federal State and local tax purposes. LLCs pay a fee to the State, and those conducting business in the City are subject to the City unincorporated business tax. Over tirne, the number of corporations is expected to decline as new businesses increasingly opt for the LLC business form. The shift of filers from the general corporation tax base to the unincorporated business tax base is forecast to decrease the corporatiori tax collections by an estimated $122 million in 2002 and $145 million by 2005. The income-plus-compensation alternative tax computation of the general corporation tax has been modified by phasing out the portion of the tax that applies to compensation paid to corporate officers and by increasing the per-firm statutory deduction. For tax years beginning on or after July 1, 1996, 25 percent of officers’ compensation was exempted from the tax. For tax years beginning on or after July 1, 1997, the statutory deduction per firm was raised; from $15,000 to $30,000. For tax years beginning on or after July 1, \ i 1998, 50 percent of officers’ compensation was exempted from the tax and the statutory deduction per firm was raised from S30,000 to $40,000. For tax years beginning on or after July 1, 1999, a 100 percent 'if exemption for officers’ compensation applies. Compensation paid to individual shareholders owning at least five percent of the firm remains fully subject to the alternative tax.

for tax years,,beginning on or after July 1, 1996, “the place of business’’ requirement for allocation of taxa()le income fof the general corporation tax has been repealed. Under City tax law, a business operating in the City with a place of business outside the City is allowed to apportion its business income according to a three-factof formula based on the share of its total property, payroll and receipts in New York City. The right to apportion incoirie was previously not available to firms that sold goods or services throughout the country or, the world, but only had a City business location. These firms were required to pay tax on all taxable income. All taxpayers conducting business outside the City are now allowed to allocate income with the eliinination of the “place of business” requirement.

For tax years beginning on or after July 1, 1996, manufacturing firms are allowed to “double weight” the receipts factor in the allocation formula fof the general corporation tax. This enables City located I manufacturers to allocate more of their income outside the City, thus reducing their City business income taxes and aiding their competitiveness.

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