NYC-WTC_000195490

NYC 9/11 Public Portal Document

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jector in I UNINCORPORATED BUSINESS TAX UNINCORPORATED BUSINESS TAX 1992-2002 pile the if The unincorporated business tax is 900 in 2002 ■s of the : projected to account for, 3.5 percent of tax 800 r revenue in 2002, or $778 million. 700 Tax Base and Rate: The unincorp- I 600 /' ■ orated business fax is levied on the ■ business income of all proprietorships I and partnerships doing business in New 400 I York City. The tax is paid in addition to 300 ** the City's personal income tax. Unincor- * porated businesses include trades, 200 professions or occupations conducted by 1992 1993 ; 1994 1995 1996 1997 1998 1999 2000 2001 2002 individuals or unincorporated entities, / Fiscal Year such as partnerships, estates, trusts and I limited liability companies (LLCs). The unincorporated business tax rate has been four percent since its imposition in 1966. \

Entities engaged in the purchase and sale of property on their own account, except as a dealer holding property! primarily for sale to customers in the ordinary course of trade or business, are excluded from the unincorporated business tax base. This exclusion includes the purchase, sale or writing of stock option contracts. The self-trading exemption was expanded for tax years beginning on or after January 1, 1996 to reflect the changing marketplace. Qualifying property now specifically includes not only stocks and securities but also foreign currencies, publicly traded commodities and derivative financial instruments (including options and futures contracts).

Every unincorporated business which operates in New York City must file quarterly declarations of estimated tax if its estimated tax can reasonably be expected to exceed $1,800. Final returns must be filed by every partnership having unincorporated business gross income exceeding $25,000 or having unincorporated business taxable income exceeding $15,000. Unincorporated businesses other than partnerships must file final returns if their unincorporated business gross income exceeds $75,000 or their unincorporated business taxable income exceeds $35,000. The unincorporated business tax base starts with the Federal definition of net profits from business operations plus other business income and is then modified to reflect differences between City and Federal rules. The income is allocated if the business is carried out both inside and outside the City. I! Income allocation is determined either by a separate accounting method or by a three-factor formula based on 1:^ j payroll, property and gross income. )

After income is determined and allocated, a taxpayer is allowed a deduction equal to reasonable compensation for the taxpayer’s personal services. This deduction equals the lesser of 20 percent of allocated j income or S5,000 per individual or active partner. In addition, taxpayers are allowed to exempt the first f $5,000 of income from taxation. The tax rate of four percent is applied to the remaining base. Beginning with I' tax year 1997, taxpayers whose liabilities are $1,800 or less are entitled to a credit which eliminates their liability. The Credit is reduced for taxpayers with liabilities between $1,800 and $3,200, and for liabilities of I ’ $3,200 and'above no credit is allowed.

I Legislative History; New York City has imposed the unincorporated business tax on sole proprietorships and partnerships since 1966. Since its imposition, the tax rate has remained at four percent. Major amendmehts to the' tax became effective in tax years 1971 and 1987 and in City tax programs enacted in July of 1994,1996 and 1997.

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