New York Basic Business Taxes 2011
New York's economic development, finance, and tax organizations provide a range of incentive programs to initiate new business and commercial investment. Specific programs include corporate income tax, investment tax credits, and the Excelsior Jobs Program.
Area Development Research Desk (March 2011)
Corporate income tax:
New York State's maximum corporate franchise (income) tax rate for most corporate taxpayers is 7.1 percent; for qualified New York manufacturers the corporate franchise tax is 6.5 percent.
Corporations pay the highest tax computed on the following four alternative bases:
1. A tax of 7.1 percent (6.5 percent for qualified NYS manufacturers) on allocated entire net income;
2. A tax of 0.15 percent on allocated business and investment capital (maximum for qualified NYS manufacturers: $350,000; maximum for non-manufacturers: $1 million;
3. A tax of 1.5 percent on allocated minimum taxable income; and
4. A separate minimum tax at fixed dollar amounts, ranging from $25 to $5,000, based on New York receipts.
An additional tax of 0.09 percent applies to a corporation's allocated subsidiary capital.
A surcharge rate of 17 percent also applies to a taxpayer's post-credit tax liability allocable to the 12-county Metropolitan Commuter Transportation District (MCTD). This includes the City of New York, Long Island, and the mid-to-lower Hudson River Valley.
Metropolitan Commuter Transportation Mobility Tax (MCTMT): Tax imposed on certain employers and self-employed individuals engaging in business within the Metropolitan Commuter Transportation District (MCTD), which includes New York City (the counties of New York (Manhattan), Bronx, Kings (Brooklyn), Queens, and Richmond (Staten Island)), and the counties of Rockland, Nassau, Suffolk, Orange, Putnam, Dutchess, and Westchester. The MCTMT is imposed at a rate of 0.34 percent of an employer's payroll expense for all covered employees for each calendar quarter. No exemptions or credits apply.
Sales and use taxes:
A 4 percent sales tax (4.375 percent in New York City and the 12-county Metropolitan Commuter District) is levied on retail sales of tangible personal property and certain services, as well as on the use of such property and services upon which sales tax was not collected. The tax is based on receipts from retail sales. Furthermore, counties and cities may impose additional sales and use taxes up to an additional 4.75 percent.
Sales and use tax exemptions:
Exemptions from state and local sales and use taxes are provided for:
•Machinery and equipment used directly and predominantly in manufacturing, mining, and experimental research and development.
• Tools used directly in manufacturing, mining, and refining.
• Commercial aircraft, machinery and equipment installed in such aircraft, personal property used in aircraft repairs, and certain aircraft equipment.
• Repair, installation, and maintenance of manufacturing machinery and equipment, including parts, tools, and supplies.
• Manufacturing machinery and equipment, and fuels and utilities used or consumed in the manufacturing process.
• Building parts, packaging materials, manufacturing fuels and utilities, and fuel for aircraft.
All real property within the state is taxed at the local level. Property is assessed where located at a portion of the actual value by local assessors. Personal property is tax-exempt.
Industrial or commercial construction or reconstruction in designated areas of New York City may be exempt from real property taxes. Exemption rates and terms vary with the area and type of business facility.
Commercial and industrial facilities constructed or reconstructed outside New York City at a cost of more than $10,000 may be eligible for a partial exemption from local real property taxes. The maximum exemption amounts to 50 percent of any increase in value in the first year following completion and declines by five percentage points in each of the succeeding nine years.
Industrial or commercial facilities financed by industrial development agencies are exempt from property taxation. Negotiated payments in lieu of taxes can be made to municipalities.
Pollution-control facilities are exempt from local real property taxes and ad valorem levies on any increase in value resulting from the construction of such facilities.
Investment tax credit (ITC):
A credit equal to 5 percent of investment (up to $350 million; 4 percent rate on amount over $350 million and for personal income taxpayers) in buildings and tangible personal property, acquired by purchase, with a useful life of four years or more and used in production (manufacturing, processing, assembling, agriculture), financial services, qualified film production facilities, or research and development. The ITC is available at an optional rate of 9 percent (seven percent for personal income taxpayers) of qualified investment in research and development property. The ITC can reduce corporate tax to the higher of the alternative minimum tax or fixed dollar minimum tax. The ITC is taken in the year investment made or property placed in service. New businesses may take a refund of unused credit, and other unused credits may be carried forward 15 years (10 years for personal income taxpayers).
An additional credit for the same capital investment is available in each of the two years following the investment if employment in those years reaches specified levels. If employment is at least 101 percent of the base year level but less than 102 percent, the credit is 1.5 percent; at least 102 percent but less than 103 percent, two percent; and at least 103 percent, 2.5 percent. Unused credits may be carried forward for up to 15 years (10 years for personal income taxpayers).
Effective for property placed in service after October 1, 1998, but before October 1, 2011, the investment tax credit (ITC) is extended to tangible personal property principally used in the ordinary course of business: As a broker or dealer in connection with the purchase or sale (which shall include but not be limited to the issuance, entering into, assumption, offset, assignment, termination, or transfer) of stocks, bonds or other securities, or of commodities (as defined in the Internal Revenue Code
• Of providing investment advisory services for a regulated investment company (as defined in the IRC), or lending, loan arrangement, or loan origination services to customers in connection with the purchase or sale of securities
• As an exchange registered as a national securities exchange or a board of trade