NYC-WTC_000195490

NYC 9/11 Public Portal Document

were extended. Provisions were enacted that exempted income from self-trading activities for unincorporated entities that were primarily engaged in trading for their own account or in the ownership, as an investor, of interests in unincorporated entities engaged in unincorporated business activities in the City. This provision is in addition to the self-trading exemption. An unincorporated entity qualifying for the partial exemption is allowed to exclude from its unincorporated business gross income any income and gains from activity qualifying for the self-trading exemption. Prior to the change, any amount of income could “taint” the trading income, causing all of it to be taxed. Further, rules for apportioning investment income subject to tax were conformed to the'general corporation tax (issuer’s allocation percentage). Additions also were made to the number of financial instruments used by self-traders and a “primarily engaged” test was established, which defines taxpayers as self-trading according to the nature of their assets. It The City’s tax program for 1998 revised the unincorporated business tax credit increase granted in the 1996 tax program. For tax years 1997 and after, the maximum credit vyas lifted to $1,800 with the level of liability at which the credit ^phases put at $3,200. The new credit eliminates unincorporated business tax for sole proprietors with net income up tO $55,000. Partnerships have similar benefits, with the “ho tax threshold” varying with the number of partners. In addition, beginning in tax year 1997, unincorporated business owners are able to take a partial credit against their City resident personal income tax liability for their share of the business’ unincorporated business tax payments. The credit ranges from a maximum of 65 percent of the unincorporated business tax paid (the distributive share for partners) for personal income taxpayers with NYS AGI of $42,000 or less, to 15 percent for those with NYS AGI of $ 142,000BSS or more.

Effective for tax years on or after January 1, 2000, the receipts factor of the income allocation formula of the City’s unincorporated business tax was amended to permit receipts from management, administration or distribution services for regulated investment companies (mutual funds) to be allocated based on the domicile of the mutual fund’s shareholders.

Distribution and Industrial Mix of Filers: In 1997, there were 196,002 partnership and sole proprietorship filers of which 24,097 paid tax. Sole proprietorships comprised 77.7 percent of all taxpayers

UNINCORPORATED BUSINESS TAX (Tax Year 1997) By Industrial Sector Nuniiter of Taxpayers ■■■■■Hi Liability ■ 6.5% FIRE 27.5% ( /! Manufacturing, 1 18;2% Communications & 8.0% Other 1-13.4% Trade 1.3%

16.5% Legal Services 33.2%---- L-

Accounting 1 3.5% Services 6.2%

Other -51.9% Services 23.8%

Sourie: NYC Department of Finance, Office ofTax Policy 1 n i 67

NYC-WTC_000195564